Insurance for EQ prone buildings
Question from Nicholas updated on 3rd July 2017:
I am looking to buy an apartment in an earthquake prone building in Wellington. The strata of the block only recently received the warning and has 12 years to rectify this issue. How does the status of the building reflect on getting the mortgage?
Our expert Myles Noble responded:
When lending the banks are going to want to know if you can get insurance. When buying into an earthquake prone building in Wellington you are at the mercy of the insurance market and reinsurance capacity – as the property is not attractive to insurers.
The insurance cost is likely to be considerably higher than in a body corporate that is not earthquake prone. This insurance cost will be passed on through body corporate fees and can change significantly depending on the insurance market.
In harder insurance markets it is also possible that the body corporate may not be able to purchase any earthquake cover at all, or only limited earthquake cover. The cost of the contract works and the disruption to the property when the strengthening takes place will also be significant. All of these factors can impact on a bank’s decision to lend. They can also affect resale value.
Myles Noble is head of claims and earthquake response for Crombie Lockwood. He also holds various advisory board positions in the insurance industry.