Condo associations across California are urging the state to subsidize the exploding cost of property insurance covering wildfires.
Eighteen state senators, led by Toni Atkins of San Diego, the Senate President Pro Tempore, sent a letter last month to state Insurance Commissioner Ricardo Lara calling on Lara to increase the limits on California's FAIR Plan commercial coverage program from $8.4M to $20M, according to a report in the San Diego Union-Tribune.
The FAIR Plan is a pooled risk program backed by all state-licensed property insurers that serves as a "temporary" safety net of basic wildfire coverage when there is a dearth of coverage being offered in the marketplace. Though they are residential, condominiums typically are covered with commercial insurance.
The increased state subsidies are needed to provide relief for condo communities located near canyons of open spaces in areas that are vulnerable to wildfires in a state where the wildfire "season" now extends for more than six months.
As the wildfire threat continues to grow each year in the Golden State, it continues to encroach on suburban communities, including in San Diego County—but many of these communities are encountering a reluctance from insurance carriers to issue new or renewed policies that cover wildfires.
"Constituents have reported special assessments of thousands of dollars per year, and in some cases, premiums of nearly $1,000 per unit, per month just to maintain the master policy of their housing development," the legislators said, in the letter to Lara. "This is an untenable situation, potentially affecting millions of California homeowners."
A good example is the 338-unit Morada community in Rancho Bernardo, which last year purchased $73M in coverage for $133K. In January, Farmers Insurance declined to renew the policy—and the lowest-priced replacement the community's homeowners' association (HOA) could find as a $10M policy for $885K per year, the Union-Tribune reported.
The Morada HOA told the newspaper that it also has looked into increasing its coverage to $80M due to increased construction costs but was told the premium would surge to nearly $2.7M per year—a price that would force the HOA to place a special assessment of about $8,000 per unit on homeowners in the community.
Farmers also declined to renew property coverage–$50M in coverage that was costing $47K per year—for Canyon Park Villas, a 240-unit condo community in Mira Mesa.
The community's HOA was unable to find a state-sanctioned carrier to replace the policy, so it ended up opting for $10M in coverage from Lloyds of London that costs $600K per year, or thirteen times what the HOA had been paying, the report said. To pay for the increase, the Canyon Park Villas HOA enacted a $2,500 emergency special assessment.
A 220-unit San Marcos community, who asked the newspaper not to identify them, said they board coverage in the secondary market that raised their annual premium to $900K from $40K.
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