This article discusses whether a body corporate can self insure in Queensland, explaining in plain terms that self-insurance is not allowed under current law and that bodies corporate must hold building insurance with an authorised insurer, even when premiums are high.
Question: Our committee is considering self insurance? Who can assist us with advice?
I am a committee member for a body corporate in North Queensland. Our property insurance premiums have increased significantly over the past four years. The body corporate is considering self insuring and wants guidance on the appropriate amount to hold in a self insurance fund to cover unexpected events. Who can provide independent advice on self insurance and help assess the appropriate funding level?
Answer: Bodies corporate in Queensland are not permitted to 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.
Tyrone Shandiman
Strata Insurance Solutions
E: tshandiman@iaa.net.au
P: 1300 554 165
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.
This post appears in Strata News #778.
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