Last week, Community Associations Institute’s California Legislative Action Committee (CLAC) held their annual Advocacy week across California. Conducted virtually, the eight California CAI chapters met with their legislators during chapter-specific sessions. Hundreds of community managers, homeowners and business partners attended these sessions.

One of the topics discussed was the insurance crisis in California. I don’t use the term “crisis” lightly. Wildfires and other disasters over the last few years have forced many insurance carriers out of the market. Those that have stayed have had to make the business decision to be pickier about what they will insure.

Condominium communities have long been the gateway to homeownership for first-time homebuyers and retirement homes for seniors. They traditionally have been the most affordable option, and affordable housing is high on the list of concerns for most legislative districts. But this insurance crisis is turning the American Dream into a nightmare.

Common Interest Developments, including condominiums, must purchase commercial insurance policies to protect the property of the associations. For condominiums, the buildings containing the homes are included in that property. But those aforementioned picky carriers are unable to provide insurance to community associations that are located in brush zones, have a negative loss history, or have aging infrastructures. Those communities are seeing their insurance premiums skyrocket, or they are dropped altogether. Since costs in CID’s are shared among all the owners, this imposes a financial burden on everyone in the community.

A 101-unit condo that is nowhere near a brush zone and with a clean loss history recently had their insurance non-renewed because most of the electrical panels and plumbing pipes are original from when they were built in 1968. Their insurance premium went from $34,000 per year, to $188,000 per year. In other words, from $336 per owner per year to or almost $1,900 per unit per year. And they are considered lucky. Another community of 288 units requires $70 million of property coverage but can only get $10 million of coverage at a cost that is 380% higher than previous years.

Governing documents for most communities require property coverage of 100% of the value, as do federally backed loans. This means that, for those in associations that cannot get full coverage, their owners find it difficult to sell their homes or even refinance their loans to get cash to pay their increased premiums. They are quite literally stuck.

The CAI-CLAC insurance task force has been working with the Department of Insurance to address this problem and come up with short-term and long-term solutions. You may have heard that the FAIR Plan recently increased their building limit to $20 million. This will help some communities, but, like that one that needs $70 million – some will not be helped at all.

There is not currently legislation to address this insurance crisis, but CAI-CLAC’s Insurance Task Force made it clear that they are looking for legislative partners to help be part of the solution. Already, several offices have reached out to Louie Brown, our legislative advocate. We look forward to continuing our work with the DOI in realizing both short and long-term solutions for California community associations.

Terri Guest, CIRMS, CMCA, EBP is the Senior Sales & Marketing Representative for Northern California for Berg Insurance Agency and can be reached at terri@berginsurance.com.