The Ever-Changing HOA Insurance Market

If you have seen your association’s master insurance premium increase in recent years, know that you are not alone. The insurance market for multi-unit dwellings (i.e. condos and townhomes) continues to be volatile. According to Marsh & McLennan, for the past eight years Minnesota has ranked in the top three for “catastrophic losses.” Hail storms and severe thunderstorms seem to be the primary culprits. In 2014, the President of the Insurance Federation of Minnesota, Bob Johnson, reported that the storm clusters that affect the South West Metro in August of 2013 reached nearly $1 billion in losses. Similarly, the storms that came through in 2007 went over $1 billion, and in 2008 reached $1.5 billion. The loss history and risk exposure has created a market place that has consistently increased insurance premiums over the past 10 years – and significantly reduced the pool of carriers that will even consider insuring condominium and townhome communities. In response, carriers are diversifying policies. One particular market change that will affect many associations in 2016 is the addition of separate wind/hail deductible. For example, American Family, which insures a large share of the townhome market in Minnesota, has stated that all communities made up of more than 10 buildings will require a 1% or 2% wind/hail deductible, per building, for new and renewing policies. Until the losses subside, or until more players enter the market place, it is hard to see premium increases stabilize – and easy to see policy changes shift some risk exposure back to the association and/or homeowner’s HO6 policies.