British Columbia’s real estate insurers tighten rules for homeowners and builders in areas affected by wildfires

Motorcyclists stopped at a gas station to watch a cloud of pyrocumulus, also known as a cloud of fire, produced by the Lytton Creek fire rises in the sky above Lytton, Columbia. British, August 15.

DARRYL DYCK / The Canadian Press

Homebuilders and landowners in British Columbia are seeing an increase in the number of insurers refusing to approve insurance policies for residential and commercial buildings located near an active wildfire – in some cases of fires that burn 100 kilometers away.

“These are pretty sudden changes from historical practices,” said Carmina Tupe, director of policy and government relations at the Canadian Home Builders Association of British Columbia. “These are very large areas that can sometimes extend over an entire city. The problem is, it’s a bit of a holistic approach.

British Columbia has had one of the busiest wildfire seasons, with almost 1,600 wildfires so far this year. Fires can continue to burn for months, well beyond the date an evacuation order was canceled. The spike in activity has led property and casualty insurers to reassess their risk portfolios and tighten underwriting rules during the forest fire season.

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As a result, some home builders experience construction delays of several months, homebuyers cannot get mortgages without insurance contracts, and property owners – commercial and residential – must seek last-minute coverage because their existing policies are set to expire.

“Many insurers have reduced their exposure to clients who are close to forests,” said David Edgar, director of brokerage at Capri CMW Insurance Services Ltd.

Mr Edgar said that while some insurers “do the right thing” during wildfire season and extend coverage to customers whose insurance expires or renews near a fire, other insurers will not accept a new risk if a property is in jeopardy.

“Regulators must step in to protect customers,” he added.

Home insurance generally protects an already built structure against damage and theft. Builder’s risk insurance – also known as construction insurance – covers residential or commercial property that is under construction, and includes both the building and the construction materials, as well as any damage due to an insured event, such as fire, flood, theft or vandalism.

During wildfire season, many insurance companies have typically temporarily suspended the sale of home and builder risk insurance policies for properties and construction projects within a 25-kilometer radius. , seeing them as “imminent” threat properties. “

Now that limit is being pushed from 55 to 100 kilometers, Jenna Abbott, director of operations at Sunterra Custom Homes, said in an interview.

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“This has given us a multitude of challenges in our business,” Ms. Abbott said. “In one scenario, we were told it could be winter when the fire is out and only then can we start construction on some projects.”

Rob de Pruis, director of consumer and industry relations at the Insurance Bureau of Canada, a national industry group with 74 member insurance companies, said he was aware of temporary restrictions on coverage during the season wildfires, but urged home builders and homeowners to “shop around” because coverage is available.

“There are over 60 insurance companies that offer commercial insurance in British Columbia and they are all bound by federal competition law, which means they all have to stay competitive and make independent business decisions on certain matters. of these restrictions ”, declared Mr. de Pruis.

In addition, IBC issued a newsletter this summer advising clients that renewals of existing policies should continue to occur, regardless of the threat of a wildfire.

“Many policies include an” emergency approval statement, “which extends the expiration date of policies when an emergency is declared by the government, and ensures that the existing policy remains in force until an emergency order be terminated, “the IBC said in the newsletter. .

But Mr. Edgar of Capri CMW said not all insurers include this endorsement and recommends the industry to make it a “legal condition with language that addresses any catastrophic threat.”

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“I have received several notices of non-renewal of insurers with no possibility of extension,” said Mr. Edgar. “… As a broker defending our clients, I hope we, as an industry, can agree that intentionally forcing a client into an uninsured position is unfair and must be corrected.”

Insurance woes pose a threat to the housing supply the province desperately needs for the homebuilders association.

“It’s really tough, because we’re in the height of the construction season,” Ms. Tupe said. “If our members miss this construction period, they don’t just miss it for a few months – they could miss the entire season and have to postpone the project until next year. “

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