#NEWS

04/01/2018

Compensating policyholders for water damage: is the end near for the CIDRE Convention?

Controversial among real estate professionals and insurers themselves, the CIDRE Convention is destabilising earnings in the real estate sector. Combined with an ageing property stock, condominium budgets are directly affected. However, this convention should result in easier, faster settlement of water damage.

 

CIDRE (agreement on direct compensation and waiver of recourse for water damage) applies in case of “water damage” claims in a condominium if the amount of damage does not exceed €1,600 excluding tax for material damage and €240 excluding tax for property damage. It is therefore the injured party’s insurer who steps in without possible recourse.

If the damage exceeds €1,600 excluding tax, the CIDE-COP convention is applicable without actually substituting for ordinary law.

 

Controversial among real estate professionals and insurers themselves, the CIDRE Convention is destabilising earnings in the real estate sector. Combined with an ageing property stock, condominium budgets are directly affected. However, this convention should result in easier, faster settlement of water damage.

 

In addition, the CIDRE and CIDE-COP conventions have limits. Overly systematic handling of claims by multi-risk property insurers and a convention ceiling that has not changed in more than 40 years require a profound reform of the compensation process. The condominium’s insurance may apply without the condominium being damaged or liable.

 

Discussed for several years, this reform had never been able to see the light of day. However, the promulgation of the Alur act in 2014 introduced an obligation of civil liability insurance for a non-occupant co-owner, paving the way for a new convention. That convention, called IRSI (compensation and recourse for property claims), validated by the French insurance federation, will distinguish two levels of claims according to the amount of material damage:

> Level 1: damage under €1,600 excluding tax

> Level 2: damage between €1,600 excluding tax and €5,000 excluding tax

 

Without profoundly calling the management of condominium claims into question, the new provisions tend to follow recent legal and economic developments. This change stresses the importance of “non-occupant co-owner” contracts, which could thus increase the accountability of defaulting co-owners.

 

The implementation of this new convention is expected to begin with a testing phase in June 2018 for a final validation in 2020, after the various stakeholders (companies, experts, intermediaries) have agreed to it.

 

Major changes to the IRSI Convention

> Designation of a single managing insurer per unit

> Designation of the insurer who handles damage

> Unique expertise in fire and water damage claims of less than €5,000

> Searches for leaks, which are no longer an additional cover but considered covered

> Supervision of recourse between insurers

 

Verlingue Immobilier’s teams are supporting their clients in this change by offering solutions adapted to the needs of co-owners.