Can a Queensland body corporate self insure?

When considering the option of self-insurance for a strata property, it is important to note that bodies corporate in Queensland are not permitted to self-insure.

Under the Body Corporate and Community Management Act 1997 (BCCM Act) and the relevant Regulation Modules (such as the Standard Modules), a body corporate is required to:

• Insure buildings for their full replacement value;
• Ensure that this insurance is held with an authorised insurer.

The legislation does not permit a body corporate to substitute an insurance policy with a self-funded reserve. In circumstances where insurance cannot be obtained—for example, due to insurers declining to offer terms—a body corporate must apply for an exemption with the Commissioner for Body Corporate and Community Management.

The BCCM Commissioner has issued Practice Direction 28, which provides further guidance on these applications. It makes clear that:

• "To approve alternative insurance, an adjudicator must be satisfied that the required level of insurance cannot be obtained." 
• "The fact that the required level of insurance coverage is expensive does not of itself mean the body corporate cannot obtain insurance." 

In other words, cost alone is not a sufficient reason to avoid obtaining the required cover.

As such, establishing a self-insurance fund is not a lawful alternative under the current legislative framework. Bodies corporate facing affordability issues may wish to explore legal avenues to manage costs, such as seeking expert advice from brokers experienced in strata insurance for high-risk regions.

This information is of a general nature only and neither represents nor is intended to be personal advice on any particular matter. Shandit Pty Ltd T/as Strata Insurance Solutions strongly suggests that no person should act specifically on the basis of the information in this document, but should obtain appropriate professional advice based on their own personal circumstances. Shandit Pty Ltd T/As Strata Insurance Solutions is a Corporate Authorised Representative (No. 404246) of Insurance Advisenent Australia AFSL No 240549, ABN 15 003 886 687.