Apr 28, 2014 | News
Canadian home buyers with small downpayments face a hike in mortgage insurance premiums next week. But market watchers say the increases likely won’t be enough to slow sales in what has lately been a hot housing market in many areas, helped in large part by historically low mortgage rates.
In February, CMHC announced it would hike premiums for default insurance by an average of 15 per cent effective May 1. The increase would hit buyers who have a downpayment of less than 20 per cent. Soon after CMHC served notice of the increase, private sector competitors Genworth Canada and Canada Guaranty matched the increases.
The increases will only affect new policies, not mortgages already in existence. The highest premiums are paid by those who put down just five per cent of the home’s purchase price. At that level, the mortgage insurance premium rises from 2.75 per cent to 3.15 per cent.
On a $450,000 mortgage at 3.49 per cent amortized over 25 years, the insurance fee would rise from $12,375 to $14,175. While $1,800 sounds like a big increase, it can be financed over the life of the whole mortgage , so the monthly cost of the insurance premium in this case would rise by less than $9 a month. CMHC estimates that for the average buyer needing insured financing, the new rates will add about $5 a month.
To be eligible for the lower mortgage insurance premiums, lenders have to submit their requests for mortgage loan insurance before May 1. The closing date of the home purchase is not the determining factor.
Also, as of May 30 CMHC will no longer insure purchases by self-employed workers without third party income validation, and will offer no insurance Canadians seeking to purchase a second property.
Self-employed Canadians can still qualify for CMHC insurance, but must be able to provide proof of their income levels, the agency said. CMHC estimated the changes would effect less than three per cent of the units it insures. Given the limited use of these products, their discontinuation is not expected to have a material impact on the housing market, the agency added.
CIBC deputy chief economist Benjamin Tal said the move was not a surprise, adding that more changes are likely coming to reduce the agency’s footprint in the market.
The Finance Department has tightened mortgage rules on four separate occasions in the past several years – along with requiring stricter enforcement and management of loans – in an effort to weed out marginal buyers and excessive speculation in the housing market.
Former finance minister Jim Flaherty had also expressed concern that CMHC had become too large a player in the market, needlessly exposing Canadian taxpayers to risk should there be a housing crash. The agency currently has about $560 billion in outstanding mortgage insurance on its books.
Flaherty and the Bank of Canada have for several years expressed concerns that too many Canadians risked becoming over-extended in the mortgage markets, especially once interest rates begin to rise.
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Mar 26, 2014 | News
This winter’s extreme weather has been wreaking havoc with the bottom line at insurance companies, according to a story in the National Post. The Insurance Bureau of Canada pegs claims against property and casualty providers related to catastrophic events last year at $3.2-billion nationwide, triple the annual average for the past five years.
While this number is not totally due to the weather, weather-related events account for a large and growing part of the big bills.
In the Toronto area, the main culprit is flooding. This means that many homeowners, both those with dry basements and those with wet ones, will share the burden. Long after pipes have been repaired and soggy TV rooms refurbished, the impact of wild weather will be felt in the form of increased insurance premiums.
Aviva Canada, the country’s second-largest property and casualty underwriter, said its losses were “significant” for 2013. Last summer’s flooding in Toronto was the third-largest insured-loss event in the history of Canada and hit the company hard. This winter’s ice storm, while less costly, will generate $10-million in claims, the company estimates. It expects to see home insurance premiums rise 5% to 10% in the city.
Intact Financial Corp., the country’s largest provider of property and casualty policies, posted its first underwriting loss in years due to the disasters nationwide. The company has said it will see some premiums rise by as much as 20%. Water damage now accounts for more than half of the amount it pays out in claims.
To help customers absorb the bad news, insurance companies are offering “loss mitigation” discounts, which can serve to hold premium costs down.
Tracy Laughlin, vice-president of personal lines for the Ontario and Atlantic Division of Intact Insurance also stresses the importance of knowing exactly what’s covered by a plan. Often people don’t realize that sewer backup protection is not necessarily included in comprehensive or all-risk coverage, which is the kind that most people buy. While typical packages include coverage for in-house water damage, from such issues as leaky pipes or overflowing toilets, sewer backup protection is usually considered an add-on — one that would have been worth having during last summer’s deluge in Toronto.
Excerpted from the National Post
ILScorp Continuing Education Subscribers – did you know that your General or Adjuster subscription includes a series of five Homeowners Insurance Policy courses? These online insurance training courses, each good for one continuing education credit hour, are accredited in BC, Alberta, Manitoba, and Saskatchewan.
The five-part series, written by Steve Hawrishok, includes courses covering:
1. Property Coverages Agreements & Definitions
2. Property Coverages A-D
3. Extensions of Coverage
4. Insured Perils & Exclusions
5. Basis of Claim Payment & Other Terms
All five courses are now included in the general and adjuster continuing education course catalogues at no extra charge to ILS subscribers. They can also be purchased individually.
Go online at www.ilscorp.com or call us a 1-800-404-2211 to join the more than 23,000 other Canadian insurance professionals who are learning with ILScorp every year.
Oct 17, 2013 | News
This morning marks the 2013 Great BC Shakeout. BC is one of many North American jurisdictions that take time out to remind people how to safely protect themselves in an earthquake. At 10:17 a.m., participate in the Great BC Shakeout by practicing how to “Drop, Cover and Hold On” in your home, workplace or classroom.
After you complete the drill and climb out from under your desk consider this: with the risk of earthquakes running high in BC, earthquake insurance is an important and evolving aspect of homeowner’s insurance in BC. Are you able to answer your clients’ concerns and do you know how to best meet their homeowners insurance policy needs?
A series of 5 new Homeowners Insurance Policy courses designed for insurance agents and adjusters has been launched by ILS. These online insurance training courses, each good for one continuing education credit hour, are accredited in BC, Alberta, Manitoba, and Saskatchewan.
The five-part series, written by Steve Hawrishok, includes courses covering:
1. Property Coverages Agreements & Definitions
2. Property Coverages A-D
3. Extensions of Coverage
4. Insured Perils & Exclusions
5. Basis of Claim Payment & Other Terms
All five courses are now included in the general and adjuster continuing education course catalogues at no extra charge to ILS subscribers. They can also be purchased individually at www.ilscorp.com or call us a 1-800-404-2211, to join the more than 23,000 other Canadian insurance professionals who are learning with ILScorp every year.
