Understanding the Rise in Strata Insurance Premiums Amid Climate Challenges

Extreme weather events, including floods, storms, and cyclones, have become more frequent and severe across multiple states. The Insurance Council of Australia reports that these catastrophes have resulted in billions of dollars in insured losses, with a significant portion affecting residential and strata properties. The complexity of claims in multi-unit buildings, where damage often impacts common areas and multiple units simultaneously, has led to extended repair timelines and higher overall claim costs.

Insurers are responding by adopting more detailed risk assessments. Beyond basic property details, factors such as building age, construction materials, maintenance standards, and risk mitigation measures are now critical considerations. Properties with outdated valuations or inadequate maintenance records may face higher premiums or difficulty securing coverage. Underinsurance remains a prevalent issue, as outdated building valuations can lead to significant shortfalls during claims, placing financial strain on owners corporations.

Climate risk has become a central focus in strata insurance underwriting. Policies are increasingly structured to account for these risks, resulting in higher excesses for weather-related claims, stricter policy conditions, or reduced insurer appetite in high-risk areas. Buildings with poor drainage, ageing infrastructure, or limited maintenance records may encounter more challenging insurance outcomes.

To navigate this evolving landscape, owners corporations should prioritize proactive risk management. Regular maintenance, updated building valuations, and the implementation of risk mitigation strategies can enhance a property's insurability. Engaging with insurance brokers to understand policy terms and exploring options for coverage can also provide better outcomes.

In summary, the strata insurance market in Australia is adapting to the realities of climate change and associated risks. By understanding these dynamics and taking proactive measures, strata property owners can better manage insurance costs and ensure adequate protection for their assets.