Insurance Capacity Constraints Impacting High-End Strata Properties

Industry experts have observed that, despite rising premium rates over recent years, the availability of insurance for large-scale strata buildings remains restricted. For instance, in Brisbane, a major insurer reduced its coverage capacity from 100% to 70% for a high-rise client, declining to quote on several other large properties. Similar trends have been noted in Melbourne, indicating a systemic capacity shortage affecting the high-end strata market.

The reasons behind this capacity crunch are multifaceted. While high-rise buildings often exhibit greater resilience to natural disasters compared to smaller developments, insurers remain cautious. Historical issues such as cladding defects and structural problems have heightened risk perceptions, leading to a more conservative approach in underwriting large strata properties.

Given that insurance rates have increased by at least 50% since 2022, the current market conditions present a profitable opportunity for insurers to enter or expand their presence in the high-end strata sector. The strong resilience of these properties to major storms and other perils makes them attractive risks. However, the lack of competition and capacity continues to pose challenges for property owners seeking comprehensive coverage.

As urban density increases and the demand for high-rise living grows, addressing these insurance capacity issues becomes imperative. Stakeholders, including insurers, brokers, and property owners, must collaborate to develop solutions that enhance market capacity, promote competition, and ensure the availability of adequate insurance coverage for high-end strata properties.