Heritage buildings deemed 'uninsurable'
Some of New Zealand's best known buildings are being rendered uninsurable following the massive losses suffered after the Christchurch earthquakes.
Hardest hit in Auckland will be suburbs like Ponsonby, Mt Eden, Grey Lynn, Remuera, Devonport, Northcote and even the recently revamped Britomart according to a top insurance broker.
James McGhie of insurance brokers Apex General Limited says many of the commercial buildings in these areas date back to 1935 and earlier, and insurers are imposing premium increases from 200 per cent to 500 per cent.
McGhie says June is a key reinsurance renewal period and even if landlords are able to pay the increased premiums, they will have a tough time passing these increases onto their tenants who may look at alternatives such as moving to more modern premises.
Streets like Ponsonby Road will be heavily impacted as they have lots of old wooden buildings which are considered higher risk, he says.
This will be the case outside Auckland also, with many insurers trying to reduce their exposure to pre-1935 buildings throughout the country.
Also under the spotlight will be reclaimed land in lower Queen Street and Wellington's Lambton Quay, says McGhie.
McGhie says the real change in the insurance criteria will mean it's a lot tougher for property owners. Previously, premiums were negotiated at a regional and city level, now properties will be segmented down to suburb and even street level.
"What this means is that those people who are applying for insurance will be required to provide much more information than they've had to previously. Basically you're starting to see insurers begin to select properties suburb by suburb depending on levels of risk."
McGhie cites an example of a 1910 commercial building in Auckland's Fanshawe Street. Two years ago its premium was $7,286 plus GST. The building has now been sold effective end-June, the premium for it's new owners is $45,657 plus GST. The new owner has little choice but to pay this increased premium as other insurers are unwilling to take the risk on, he says.
Buildings constructed 1936-1965 won't escape a hike in premiums either says McGhie. Commercial buildings in Auckland from that time period will have a likely increase of a minimum of 50 per cent.
McGhie says the new pricing rates will increase the further south property is owned, with Wellington and Christchurch being the most difficult to insure. In these two areas it is almost impossible to change insurers as they are reluctant to take on new risks because of reinsurance capacity issues.
Domestic property owners need to be prepared for the rising premiums which are likely to affect them too.
McGhie says rate increases of 30% are common for houses with EQC levies also going up significantly.
As technology improves, suburbs can be isolated as insurers can better understand the risk levels they are exposed to and also forecast where on-going natural disasters might occur, he says.
Landlords wanting insurance will need very detailed information including Geotech reports, earthquake strengthening reports, and property construction surveys, along with current valuations.
McGhie advises property owners wanting to minimise insurance increases to get in touch with their broker for an assessment of their risk profile with a view to being better prepared.
He suggests owners should heed requests by insurers to undertake detailed building surveys and provide any other reports they require.
In addition, a cost versus benefit analysis should be carried out across any property improvements recommended by insurance companies.
McGhie also suggests that agreeing on a higher excess and premium funding across the year may also assist with managing increased insurance costs.