No insurer is willing to take on our body corporate – Now what?

As sectional title schemes face increasing underwriting scrutiny, some bodies corporate and homeowners’ associations (HOAs) can't find an insurer willing to underwrite their risk. Insurers are under no obligation to accept every risk; they may decline cover based on factors such as poor maintenance, fire hazards or a history of claims. Existing policies may even be cancelled or not renewed, typically due to elevated risk profiles or deferred maintenance.

However, the Sectional Titles Schemes Management Act (STSM Act) requires every scheme to carry insurance at full replacement value.

When your body corporate is uninsurable

What can happen?

• Non-compliance: If no insurer is willing to provide cover, the body corporate cannot comply with its statutory obligations.

• Catastrophic loss: Should the building burn down or suffer major damage, owners bear the full loss.

• Trustees’ liability: Trustees could be sued personally for financial losses and for failing to fulfil their fiduciary duties.

What trustees must do

These tips will enable trustees to secure insurance cover and reduce their liability:

1. Document all attempts to obtain cover (quotes, rejections, correspondence).

2. Engage a specialist broker to approach niche or high-risk insurers.

3. Request insurers to quote with exclusions, higher premiums or excesses—partial cover is better than none.

4. Disclose improvements being made to reduce the risk (e.g. electrical compliance, roof repairs, security upgrades).

5. Develop a Risk Reduction Plan and resubmit once mitigation steps are in place.

Additionally, call a Special General Meeting (SGM) to inform members of the situation, present the uninsured risks clearly, and keep full records of all communications. At the SGM, trustees must table which risks could not be insured and seek a special resolution to limit the scheme’s cover accordingly. Full transparency to owners about remaining uninsured risks is essential to meet fiduciary duties and avoid personal liability.

Trustees may consider approaching CSOS or legal counsel, however, these cannot compel insurers to reconsider but only offer guidance or alternative dispute resolution. A legal opinion may support a temporary waiver or offer trustee protection based on documented due diligence.

Self-insurance

Some schemes may try to “self-insure” by setting aside funds. However, this does not satisfy the STSM Act and exposes the body corporate to legal and financial risk. Nonetheless, bolstering the reserve fund provides a self-insurance buffer for smaller losses when market cover is unavailable.

Insurance by owners

Section 14 of the STSM Act allows individual owners to obtain insurance for their sections against risks not covered by the body corporate’s policy does, or to obtain cover for personal needs.

Best Practice

Trustees should engage a specialist insurance broker to negotiate even limited or conditional cover, backed by a clear risk mitigation plan. The best brokers will also help source financing solutions for urgent remedial action. (Raising a special levy or securing a loan are not the only ways to fund emergency projects.)

The goal is to demonstrate responsible action through documented due diligence, even if full cover isn’t immediately available. Trustees must not allow their scheme to become uninsurable – instead, proactively allocate reserve funds toward regular maintenance, enhanced security and improved fire safety.