Vancouver Sun: ‘Major correction’ in insurance market hammers non-profit housing sector

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Vancouver Sun, Dan Fumano, March 18 (interview with BCNPHA CEO Jill Atkey)

Janice Abbott and her colleagues have been looking at the calendar lately and “getting more and more antsy every day.”

The Atira Women’s Society, the non-profit Abbott leads, has been trying since late last year to renew insurance for the roughly 40 buildings they operate around Metro Vancouver, providing thousands of non-market homes to low-income renters, including women and children fleeing violence.

Atira had been told to expect their insurance premiums could double for 2020, Abbott said this week. But now, they find themselves in mid-March with insurance set to expire March 31 and despite their broker’s best efforts “working overtime,” she said, they’re unable to get a quote for insurance.

It’s the first time in Abbott’s 28 years as CEO of Atira that the group has been in this position, she said, and “it’s a huge concern.”

Bracing for a 100 per cent year-over-year increase was one thing, said Abbott, “but not being able to get a quote at all is shocking.”

Atira isn’t alone facing insurance uncertainties. Others in B.C.’s non-profit housing sector are reporting unprecedented challenges with building insurance, including soaring costs increases that will be borne by taxpayers, which, they say, will lead to cuts to other areas.

Postmedia News has reported in recentweeks about massive insurance-cost increases hitting other kinds of multi-family housing, first in B.C.’s condo market as strata came up for renewal in the first months of 2020 and then as a wave of increases hit the province’s purpose-built rental housing. B.C. Finance Minister Carole James has said the government is monitoring the situation closely and looking at short- and long-term fixes.

But the impacts on the non-profit sector pose another challenge. In a famously expensive housing market dominated by the private sector, non-market housing accounts for less than 15 per cent of Vancouver’s rental homes. Although that may be a small segment of the overall rental market, it’s absolutely crucial, said Jill Atkey, CEO of the B.C. Non-Profit Housing Association (BCNPHA).

“That housing is not only ensuring very vulnerable people can be housed, but it’s also a critical part of our workforce housing,” Atkey said. In Vancouver’s housing market, even the low end of market rents at the oldest apartment buildings are unaffordable for many people working full-time in lower-earning jobs.

The BCNPHA, the province’s umbrella organization for hundreds of societies, has a group-insurance program where members buy insurance in bulk through the brokerage Marsh Canada. Some non-profit housing providers, including Atira, aren’t part of the BCNPHA group-insurance program.

For the 2018-19 fiscal year, members of the BCNPHA group-insurance program saw an average increase of about 10 per cent in their insurance premiums, Atkey said. For 2019-20 the average increase shot up to 65 per cent, which Atkey said was unprecedented in at least the last decade, with some societies’ premiums increasing as much as 140 per cent year-over-year.

The association will find out this spring what the increase will look like for 2020-21, “and I’m knocking on wood all over the place here,” Atkey said, “and we’re hopeful that we’ll be able to stabilize the rates, but there’s no certainty in the market right now.”

Last month, after public concern over skyrocketing condo insurance costs, the Insurance Bureau of Canada launched a “task force” to investigate the issue. The task force will convene a roundtable conference call March 17 with industry, government and strata corporations in B.C. to tackle the condo insurance industry.

But there’s no mention of non-profit housing in the task force’s plans, and when asked Friday about the March 17 roundtable, Atkey said: “This is the first I’ve heard of it.”

Certain sectors of non-market housing are insulated from the large recent insurance hikes. For properties owned by B.C. Housing, the government agency uses a risk management practice called self-insuring, where through their own budget they take on the risk of covering their own possible losses rather than buying an insurance policy. This has meant B.C. Housing has, so far, not been impacted by insurance cost increases.

Co-ops are another sector of non-market housing that’s been relatively unaffected, said Thom Armstrong, CEO of the Co-operative Housing Federation of B.C., because many years ago they organized a group-insurance program that “bulks up hundreds of co-ops and thousands of co-op homes across the country in one experience-rated group and our premiums are driven by actual claims history rather than pure market forces.”

Most of B.C.’s non-profit housing providers, including Atira, have operating agreements with B.C. Housing, through which they’re subsidized by the government, so when insurance rates go up, the province foots the bill.

But, Atkey said, if the government is forced to spend more on insurance then “that means they’ve got to make cuts in other areas, so it really impacts the sector, in spite of who’s picking up the tab.”

Hundreds of those operating agreements are expiring over the next decade, Atkey said, “so if we don’t get a handle on this, there’s a risk it will substantially impact the people living in these buildings” if providers are forced to raise rents to keep operating buildings.

But some other non-market housing providers are on the hook for increased insurance costs.

Metro Vancouver Housing, which operate 3,400 non-market units in 49 locations across 11 municipalities, saw a 48 per cent increase in insurance costs from 2018-19, said Heather McNell, Metro’s general manager of regional planning and housing services. The housing provider won’t know the size of this year’s increase until later this spring when it comes up for renewal.

Last year’s big increase, McNell said, was “due to a major correction in the non-profit housing insurance market” and some major losses in B.C.’s non-profit housing entities, as well as a general trend in the insurance industry for raising insurance premiums because of global catastrophes like earthquakes and major fires.

“To date there has been no impact on rents as we do our best to absorb those costs in other ways, such as by reducing capital spending,” McNell said.

But, said Atkey, if reducing capital spending means delaying maintenance and repairs, that could also be a concern. Many buildings are aging, and “delaying capital spending pushes those costs down the road, and then the money you need to spend escalates.”

Meanwhile, Atkey and others in the sector have concurrently been dealing with how housing providers should respond to the rapidly evolving COVID-19 pandemic. If possible, Atkey would have preferred, she said, to deal with “one crisis at a time.”

https://vancouversun.com/news/complete-uncertainty-as-insurance-rates-hammer-non-profit-housing/

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