Condo Living

June 22, 2026 Published by Toronto and Area Chapter - By Vic Persaud

Why Insurance Appraisals are Important Even During a Soft Market

From the Spring 2026 issue of CCI Toronto Condovoice Magazine.

In Ontario, Section 99(7) of the Condominium Act, 1998, requires condominium corporations to establish the replacement cost for their property. Proper replacement cost appraisals ensure that insurance coverage aligns with statutory obligations, reducing the risk of underinsurance and protecting both the corporation and its unit owners in the event of a loss.

In the insurance industry, market cycles influence underwriting requirements. During a hard market period, insurers often require detailed property appraisals before providing coverage due to limited capacity and higher risk awareness. In contrast, during a soft market, insurers compete for business, sometimes relaxing appraisal requirements, particularly for multi-unit residential buildings such as condominiums. While it may be tempting for condominium corporations to defer an appraisal in a soft market, doing so can be short-sighted.

Replacement cost is more than just a number per square foot.

Modern construction costs have risen due to several factors:

1. Tariffs & Trade Disruptions

Imported building materials, such as steel, aluminum, and electrical equipment, are now significantly more expensive due to tariffs and supply chain volatility. These increases directly impact the cost to rebuild or repair condominium buildings following a loss.

2. Labour Shortages & Project Delays

Skilled labour for construction, electrical, and mechanical trades is limited, pushing wages higher and creating longer rebuild timelines.

3. Modern Building Codes & Condominium Standards

Ontario’s building code and municipal regulations have evolved, often requiring upgraded materials, safety systems, and mechanical and electrical infrastructure. Replacement cost appraisals reflect these changes, ensuring coverage matches today’s reconstruction realities.

4. Complexity of Condominium Buildings

High-rise or mixed-use condo buildings include mechanical systems, elevators, common area finishes, and structural components that require specialized cost estimation. An appraisal consolidates all these factors into a defensible replacement cost.

By mandating a professional appraisal, condominium corporations transfer the liability of establishing correct replacement costs to the appraisal company, reducing their exposure to claims disputes or underinsurance claims.

Strategic Advantages of Acting in a Soft Market

Even when insurers are not strictly requiring appraisals, condominium corporations can benefit from obtaining one:

1. Better Terms & Potential Premium Discounts

Insurers often reward corporations with current, independent appraisals because it reduces uncertainty in the underwriting process. Corporations that can demonstrate accurately valued assets may receive more favorable pricing or terms, even when insurance is competitively priced.

2. Preparation for Future Market Shifts

Insurance markets are cyclical. What is a soft market today may harden rapidly due to catastrophic events, economic shifts, or capacity constraints. A corporation with an up to-date appraisal is better positioned to adjust coverage quickly, avoiding rushed assessments when premiums rise.

3. Defensible Coverage in the Event of a Loss

An independent, professional appraisal provides a documented, defensible basis for insurance coverage. This minimizes disputes with insurers and ensures that claims are processed smoothly and accurately.

Considerations for Condominium Corporations

When obtaining an appraisal, corporations should ensure the following:

Qualified appraisal professionals: Choose firms with experience in multi-unit residential buildings and familiarity with Ontario condominium legislation and building standards.

Detailed, site-specific assessment: Appraisals should include structural, mechanical, electrical, and common area components, reflecting current replacement costs.

Documentation of assumptions and methodology: Ensures transparency for boards, insurers, and auditors.

Inclusion of escalation factors and tariffs: Reflects realistic construction market conditions, not just historical cost indices. By engaging a professional firm, boards reduce risk, satisfy statutory obligations, and create leverage with insurers, even when coverage seems readily available in a soft market.

Conclusion

While soft market conditions may make it tempting to defer insurance appraisals, condominium corporations that act proactively gain multiple advantages. Current, professional appraisals provide compliance with the Condominium Act, reduce liability, support better underwriting outcomes, and prepare corporations for inevitable market changes.

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Vic Persaud B.A.(Hons.)
Manager, Business Development Suncorp Valuations