Insurance hikes set to hit owners of old buildings

John Corfield in Ponsonby. Photo / Kellie Blizard

Owners of character buildings face huge insurance hikes that could put some of New Zealand's trendier restaurants and retailers out of business.

It is understood older commercial buildings deemed higher fire and earthquake risks will be slapped with premiums up to 500 per cent higher than current charges. The news could force the closure of cafes and bars in areas such as Ponsonby Rd, Mt Eden and Grey Lynn.

Leading insurance brokers were this week warning owners of buildings constructed before 1935 to make affordable improvements to ensure their buildings and homes were "more attractive" and "lower risk" to insurance companies.

"Anything pre-1935 is going to face massive increases if they haven't already started to see them. Anything built before 1960 will also see big increases. That is across the board - no exceptions," said James McGhie, managing director of broker firm Apex General Ltd.

McGhie said the rises would be nationwide but suburbs with older timber buildings - a higher fire risk - would be hardest hit. Brick buildings on reclaimed land such as the Britomart area in Auckland and Lambton Quay in Wellington were also vulnerable.

It is expected building owners in those areas will have to provide more information, - such as survey results, geotech reports and earthquake strengthening reports - than previously expected.

As an example, insurance premiums on one $4 million 1910 building in Fanshawe St, Auckland, had jumped from $7286 in 2010 to $11,148 in 2011 with the current bill at a staggering $45,657 plus GST.

The owners, who did not want to be identified, had to pay the bill as no other insurers would provide cover.

Craig Dowling of IAG said costs associated with the Christchurch earthquakes and a better understanding of risks were behind the increases.

"We need to pass these costs on in our premiums to ensure we remain a strong and sustainable insurer that is there when our customers need us, particularly at the time of major claims," he said.

Most of the owners of character buildings spoken to by the Herald on Sunday had either not heard of any proposed increases or believed that the increases would not affect them.

Backpackers struggling

Another big insurance bill could shut the doors of the Ponsonby Backpackers.

The business, housed in a 19th century timber building at the top of Franklin Rd, has struggled through the recession and another big bill could kill it.

The character villa is one of hundreds of older buildings along the popular cafe and restaurant strip.

Manager John Corfield said the business had paid a $1700 increase on top of last year's insurance bill and couldn't afford any more. "In this type of industry, there is not much profit anyway so we have to get occupancy levels as high as we can get them," Corfield said.

"If the costs did go up any more, with the recent rates and rent increase as well, the owners would look at closing the business. It would be a shame."

Corfield said the building had regular warrant of fitness checks and there was a maintenance programme in place.

"Apart from that, the only way we could improve the building is to redo the electrics, which is expensive."