Rising Condo insurance has been in the news recently due to rising premiums and increasing deductibles coupled with some condos not even able to even get insurance, or getting reduced capacity. There is much speculation of why this is happening in today’s market. but whatever the reasons, it has raised some timely concerns for Strata Corporations. Notably that the maintenance and risk mitigation in most Strata Corporations is inadequate. Unfortunately, the Strata Corporations that do have proper risk mitigation strategies and excellent maintenance still fall into the same category, as there has not been any reports available on the market to show the current condition of the building – including Strata Lots, where most major losses come from; as well as the risk implementation actions or strategies. Some of these conditions can be as simple as the Owners being shown where their water shuts are for their suite and the building in case of emergency or upgrading all the in-suite water lines to braided hoses.


The Recap Services Group is offering a Risk Assessment Report (RAR) that is new to Strata Corporations to complete a thorough inspection of the building, including Strata Lots. inspect the physical building/s in its current form and note the condition of the building, the quality of the maintenance schedule, and any components of current risk to the building that should be remediated. The report then goes a step further, and on a weighted percentage scale, a grade is assigned with a summary to submit to the insurance corporations to show the condition of the building. If it is a well-maintained low risk building, you will finally have something tangible to be able to show the insurers. We also provide a recommendation summary list, so if the building does get a lower grade, there will be guidance on what you can do to reduce risk, improve maintenance and increase your grade. We know that Strata Corporations may have some easy things to complete to boost their rating; and as such we do give 1 post review for the report, and update the recommendations sheet for what has been done, as well as review and potentially revise the grade if called for.


1. HOW LONG IS THE TURNAROUND TIME TO COMPLETE A RISK ASSESSMENT REPORT (RAR)?

It is about a 6-8 week turnaround time to complete the RAR. This also depends on when we are able to schedule the site visit including suites, and receive the documents from the Strata Corporation. If your insurance renewal is coming up sooner, we try to do what we can to fit your needs, however we recommend that you will get the best results from the report if you plan 3-6 months prior to your insurance renewal, as this will allow time for the report to be completed, the Strata Corporation to decide on action due to the recommendations, and a review of completion, and finally, an adjustment of grade. Then submitting to your insurance broker with enough time to review and present it to the underwriters.

2. HOW IS THE RISK ASSESSMENT REPORT (RAR) DIFFERENT FROM A DEPRECIATION REPORT?

The Depreciation Report takes a look at the physical components of the Common Property*and determines the condition of where they are at on their life cycle, how long the life cycle typically is for the building component, and how much it will cost the Strata Corporation when the component needs replacing, and adjusts for inflation. The Depreciation Report then lays out 3 models of financial planning for the Contingency Reserve Fund. The Deprecation Report serves as a very helpful long term plan to ensure the Strata Corporation knows how much the real cost of capital replacements are going to be, and helps the Strata Corporations to save adequately (and if not save adequately, then at least let the Owners know what Special Levies may be coming in the future).

Whereas;

A RAR provides a real time look at the condition of the building, the on-going maintenance or maintenance that is currently required to ensure the building components are working as they should and will not cause a substantial risk to the complex, the operations of the building, and any in suite fixtures where an upgrade is recommended. It also addresses any concerns that may happen as found in the inspection of the current conditions of the components of the building.

Example:

Depreciation Report: Sprinkler System is in average condition. Building is 15 years old, Sprinkler System should last for 40 years. Cost to replace system $500,000 in 25 years adjusted with inflation. * please note this is only an example and is not reflective of each building.

Risk Assessment Report: Sprinkler system has been reported to have had regular maintenance, and operation policy is to replace any sprinkler heads that show a leak immediately by the fire safety company contracted to the building. Regular inspections are confirmed, reports have been reviewed for the last 3 years as provided and pressure is satisfactory. RECOMMENDATION: HIGH PRIORITY: Install sprinkler cages over each head including in-suite sprinkler heads. This is a major risk for the Strata Corporation as one knocked head could cause hundreds of thousands of damages if not more. Please see cost chart estimates attached to report for budgetary figures of replacing all 124 sprinkler heads.

3. HOW MUCH DOES A RISK ASSESSMENT REPORT (RAR) COST?

As every condo building is different, we would determine the price of the RAR based on the building and how many components for the building we would be inspecting. In general, the price of the RAR is generally around 30% more than a Depreciation Report as this includes in-depth knowledge of the building systems, in-suite inspections and inventory of plumbing items, and a second site visit for confirmation and review of the completed RAR recommendations. There are also add-on options that some Strata Corporations find beneficial. These include drone inspections for closer looks of the envelope and roof, maintenance plans specific to the building including proactive envelope maintenance, and annual update plans.

We often tell our clients that having the 1st report done at the same time as a Depreciation Report with us offers significant cost savings, as the building review component for the Deprecation Report can be completed on the same site visit, and there is some duplication of inventorying of building components.