Insurance Market Challenges for Homeowners Associations (HOAs)

Rising Premiums and Limited Coverage

Insurance companies are facing increasing losses due to extreme weather events and aging buildings, leading to higher premiums and withdrawal from HOA coverage in many areas. These premium hikes are often passed on to homeowners as increased monthly dues.

Master Policies and Common Property

HOA master policies cover common property such as sidewalks, playgrounds, and (for multifamily buildings) roofs. As premiums rise, these essential maintenance and repair costs become more burdensome for homeowners.

Impact on Homeownership

Rising HOA costs are making homeownership more challenging for many Americans, particularly in areas where HOAs comprise a significant portion of the housing stock.

Turning Point: Surfside Condo Collapse

The 2021 Surfside condo collapse highlighted coverage issues, making insurance harder to secure, especially for condo associations.

Challenges for Brokers and Homeowners

Insurance brokers like Eric Skarnes are struggling to find options for clients, with renewal opportunities becoming scarce. Homeowners like Mark Foster have seen premiums quadruple, forcing them to defer maintenance projects and consider alternative insurance solutions.

National Impact

Nationwide, 31% of HOAs reported premium increases between $100 and $500 per homeowner in 2023, and 35% saw increases under $100.

Shifting Costs to Owners

Some HOAs are considering shifting the costs of rebuilding interiors after disasters onto owners, reducing the association's total insured value. This may require homeowners to purchase individual insurance policies, potentially increasing costs further.

Impact on Condo Market

Rising insurance premiums and HOA fees are dampening the condo market as potential buyers are deterred by increased costs. This has led to a decline in condo sales and an increase in inventory.

Conclusion

Insurance challenges for HOAs have significant implications for homeowners, making homeownership more expensive and difficult to attain. It is essential for HOAs and homeowners to stay informed about insurance market trends and explore alternative solutions to mitigate the financial impact.