Why insurance premiums are rising so sharply in strata buildings and what owners can do about it

Many apartment owners across NSW are opening their levy notices and asking the same question:

Why are strata costs increasing so much? One of the biggest drivers right now is insurance.

Over the past few years, strata insurance premiums have risen significantly across many apartment buildings, placing increasing financial pressure on owners corporations and contributing to higher levies.

While rising premiums are frustrating for owners, there are several industry-wide factors contributing to these increases, many of which are affecting buildings across Australia.

Why strata insurance premiums are increasing

Insurance costs are influenced by risk.

Unfortunately, a number of factors have increased the perceived risk of apartment buildings in recent years.

Rising construction and repair costs

One of the biggest contributors is the increasing cost of rebuilding and repairs.

Construction inflation, labour shortages and rising material costs have significantly increased the cost of rectification works and insurance claims.

This means insurers may face much larger payouts than they did several years ago, which is reflected in premium pricing.

Extreme weather events

Floods, storms and severe weather events across Australia have also had a major impact on the insurance market.

Large-scale natural disasters have resulted in substantial claim payouts across the industry, which can affect pricing more broadly, including for strata schemes not directly impacted.

Buildings in areas exposed to storm, flood or coastal risks may see particularly sharp increases.

Ageing buildings and maintenance issues

Older buildings can also attract higher premiums, particularly where there are signs of deferred maintenance or increased claim risk.

Insurers are paying closer attention to issues such as:

• water ingress

• roofing deterioration

• ageing plumbing infrastructure

• concrete defects

• waterproofing failures

• fire safety compliance

• lift and electrical system maintenance

Buildings with unresolved maintenance issues may be viewed as higher risk, which can impact both premium pricing and policy conditions.

Defects and combustible cladding concerns

Certain defect-related risks continue to affect the strata insurance market.

In some cases, buildings with combustible cladding, major defects or unresolved rectification works may experience:

• higher premiums

• higher excesses

• reduced policy coverage

• difficulty obtaining insurance altogether

Insurers are increasingly assessing the long-term condition and compliance profile of buildings before offering cover.

Why this affects strata levies

Insurance is one of the major expenses within most strata budgets.

When premiums increase substantially, owners corporations often have limited options other than:

• increasing levies

• reducing spending elsewhere

• drawing from existing funds

• delaying planned works

In some cases, this can place additional pressure on capital works funds and long-term maintenance planning.

This is one reason many owners are noticing rising strata costs even where there have been no obvious changes within the building itself.

What owners corporations can do

While some insurance market factors are outside the control of strata schemes, proactive management can still make a difference.

Prioritise preventative maintenance

Well-maintained buildings are generally viewed more favourably by insurers.

Addressing maintenance issues early may help reduce claim frequency and demonstrate that the building is being managed responsibly.

Keep compliance records up to date

Insurers increasingly request evidence of:

• fire safety compliance

• maintenance records

• contractor servicing

• defect rectification

• capital works planning

Organised and transparent documentation can help streamline renewals and reduce complications during the underwriting process.

Review building valuations regularly

Accurate building valuations are critical.

Underinsurance can create significant financial exposure for owners corporations if a major claim occurs.

At the same time, outdated or inflated valuations may contribute to unnecessarily high premiums.

Work with experienced strata professionals

Insurance renewals have become increasingly complex.

Experienced strata managers and brokers can help owners corporations:

• review coverage properly

• identify potential risk concerns

• compare policy options

• coordinate required documentation

• assist with long-term planning

The bigger picture

Insurance pricing is becoming one of the most important financial considerations for strata schemes across NSW.

As buildings age and compliance expectations increase, proactive maintenance and financial planning are becoming even more important for owners corporations.

While rising premiums may not be fully avoidable, buildings that are well-maintained, organised and proactively managed are generally in a stronger position than buildings that delay repairs and long-term planning.

Final thoughts

Insurance costs are rising across much of the strata sector, and many owners corporations are feeling the impact through higher levies and tighter budgets.

Understanding the factors driving these increases can help owners make more informed decisions about maintenance, financial planning and risk management moving forward.

In many cases, the buildings that plan ahead are the ones best positioned to navigate these changes over the long term.