A risk requirement is a term used by the insurance industry, and it is effectively a warning notice.
Your body corporate will have property insurance to cover the common property, and this usually also covers the individual lots depending on your scheme type.
The insurer will usually issue a ‘risk requirement’ to the client (your body corporate) if they believe that the body corporate or lot owners need to take some action to reduce the risk of a claim. The body corporate insurer will often take this action if a body corporate discloses a defect to the insurer, or if the insurer identifies a pattern in claims that may indicate a larger problem.
These are some examples of recent risk requirements, and the circumstances which lead to that requirement being issued.
Risk requirement – bathroom waterproofing test of all lots
In this example, two separate lots in a body corporate both made a similar claim for damage to walls and ceilings as a consequence of a leaking shower. Both claims were relatively minor in cost, but reviewing the claims, the insurer identified that the bathrooms in the building may not be correctly waterproofed (as two failed close together).
The insurer issued a risk requirement that every bathroom must be professionally inspected within a 3-month period, and the findings reported to the insurer.
Risk requirement – roof maintenance inspection
In this example, the body corporate made a claim for water damage to ceilings arising from a roof leak. The insurance assessor observed that the roof appeared to be in a generally deteriorated condition with several cracked tiles, rusted gutters and other maintenance issues.
The insurer issued a risk requirement that the body corporate must:
- disclose the history of any maintenance or inspections on the roof,
- carry out an independent roof inspection,
- confirm that the resulting maintenance recommendations had been completed
Risk requirement – repair of retaining wall
In this example, a body corporate committee became aware of a failed retaining wall at the site. This was not an insurance matter, however the body corporate has a general obligation to inform the insurer if the quality of the building deteriorates, or a defect is identified. The body corporate committee informed the insurer about the failed retaining wall under its insurance policy obligation.
The insurer issued a risk requirement that the retaining wall must be repaired and evidence provided to the insurer within 6 months.
