With a high proportion of under insurance or no insurance within NSW, the burden has fallen on Owners Corporations to carry a disproportionate amount of ESL.
OC’s have a legal requirement to insure their buildings under a damage policy with an approved insurer for full repair and replacement cost, a definition which includes the costs of removal of debris, professional fees, and an escalation factor to take into account the time it takes for planning and rebuilding.
Other forms of property insurance are voluntary, with owners choosing whether to insure and to what level. The compulsory nature of strata insurance therefore results in OC’s paying a disproportionate share under the old system.”
From 1 July 2017, any new or renewing insurance policy in NSW will not include a charge for ESL. The NSW Government expects that the cost of insurance may fall as a result, on average, by up to 20% for residential property and up to 30% for commercial property. Savings for compulsory owners corporation insurance should be significant.
OC’s will be the ultimate winners with these changes, as a broader property-based levy will extend the funding base and lower costs for strata owners.
Paul Keating, Managing Director, Strata Community Insurance