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The tragic partial collapse of Champlain Towers in Surfside, Florida, could roil insurance markets for condominium buildings in the area from both property and liability standpoints, industry sources say.
So far, however, there have been no drastic changes in an already hardening market as policyholders reach out with coverage concerns, they say.
“We don’t have any moratoriums issued on Florida or Miami,” meaning insurers have not issued any unilateral embargoes on writing business, said James “Chip” Stuart, North American real estate practice leader for Hub International Ltd., based in Los Angeles. “I have not seen a course correction in the last weeks or a change in the way underwriters look at risk.”
“There has been no knee-jerk reaction,” said Miami-based Richard Rodriguez, senior vice president and condominium practice leader for USI Insurance Services LLC.
But changes may be coming.
“I think we’ll see a lot more questions come from underwriters in this class of business going forward,” Mr. Stuart said, adding that should a beachfront condominium show similarities to the Champlain Towers structure, “The underwriter will probably ask a few more questions.”
“I think there will be some closer reviews of multistory buildings,” said Doug Dierdorf, community association practice group leader with McGriff, which is part of Truist Insurance Holdings Inc., in Sarasota, Florida.
Liability insurance issues, including insurance limits, may also become an issue, Mr. Stuart said. If condo board members are sued, “do they have enough insurance?” he said.
The Champlain Towers building had about $48 million in property and liability coverage, which a judge said was “inadequate” earlier this month.
“Board members are concerned about their liability,” Mr. Dierdorf said. “That’s why volunteers are hesitant to be on a board,” he said, adding that board members probably have $1 million in directors and officers liability coverage.
Prior to the collapse, condominium building policyholders had already seen rate hikes and shrinking capacity.
“We are now in a very hard market. We’ve seen a change in the marketplace but not tied to a catastrophic event,” Mr. Rodriguez said.
“Underwriters have been pulling back. There’s less capacity and higher prices,” Mr. Stuart said.
The South Florida condominium insurance market has seen periodic insurer withdrawals and entries over the past few decades, Mr. Rodriguez said.
For example, American Capital Assurance Corp. was ordered into receivership for purposes of liquidation by the Second Judicial Circuit Court in Leon County, Florida, in April. The Florida Department of Financial Services is the court-appointed receiver of AmCap, according to information published on the department’s website.
Sources agreed that it is too early in the investigation of the Champlain Towers event to draw any firm conclusions about its effect on the market.
“Until we have a cause of loss, it is premature to do any type of speculation,” Mr. Rodriguez said.
Mr. Dierdorf said he has received numerous calls and emails from policyholders with coverage questions following the collapse.