Not too long ago I was the voice of doom and gloom warning you of drastic price hikes for earthquake insurance which stemmed from decreased capacity due in large part to the country’s financial crisis. For several months now, smaller HOAs in particular have had to contend with shrinking coverage options and swelling premiums caused by a noticeable shortage of quality insurance carriers willing and able to take on earthquake catastrophe risks at an acceptable price point.  Many condo associations were forced to face lose-lose scenarios with dire choices: 1) drop  quake coverage entirely and go naked 2) increase deductible and gut coverage completely  3)stick already stressed owners with assessments to keep current policy in place.

Here’s why.

In the first quarter of 2010, there were only three companies aggressively selling earthquake policies for condo associations in the 2.5 million to 10 million dollar range. This lack of competition among carriers willing to write  condo complexes with 60 units or less caused premiums to spike and then level out at relatively high prices.

The good news is that recent developments in the California earthquake insurance market present HOAs going out to market right now more options and lower prices than we have seen in some time!

Here’s what is happening.

Fortunately, two new companies (Empire and Great Lakes) entered the fray at the end of March 2010 and proceeded to aggressively go after the condo association market.  Not only are these companies offering attractive pricing, their emergence has also lead to better terms and  lower prices for the marketplace as a whole.

Empire Indemnity, an AM Best A rated non-admitted carrier,   is part of Zurich Financial Services Group which has been a leading supplier of insurance and risk management services since 1872. Empire brings value and savings to the table because they are willing to write policies for any size building with no minimum premium requirements. This has caused premiums to drop on average by 20% and there is now an opportunity to get a deductible as low as 5%.  Not every HOA will be able to take advantage of Empire’s premium deals because rate structures are determined by many factors such as building location and the type of construction etc.

Another new player is Great Lakes Reinsurance, an A+ AM best rated non-admitted company, which is part of the world’s largest reinsurer Munich Reinsurance Insurance Company.  The best thing about Great Lakes is the fact that they are willing to consider older buildings with some tuck under parking which previously had very limited markets at extremely high prices. In addition, they are competitive for better risks as well (I.e. buildings newer than 1976).

What does this mean for your HOA?

Higher capacity and lower pricing is great news for building owners and association boards. Elliot Katzovitz Insurance Agency recommends all HOAs to make sure that their insurance broker is actively shopping their account this year to all available earthquake markets. Approving a lazy renewal without making sure that all of the markets have been approached could cost you a considerable sum of money. And, who can afford to waste money?

Now is the best time to lock in one year of great coverage at much better rates than last year. Lower pricing may not last long so time is of the essence. If an earthquake or major hurricane were to hit the states before you bind your policy then all bets are off. Remember that following hurricane Katrina and the Northridge quake capacity dried up overnight and rates went up through the roof.

Are you 100% sure that your current agent has access to all available earthquake insurance options? If not, we are happy to help you find out whether or not that your agent has shopped all the markets for you.  All it takes is a 5 minute phone call (310) 945-3000

Elliot Katzovitz Insurance Agency, Inc. works hard to make sure our clients get the best possible coverage at the lowest possible price.