Why does the bank or lender need this?

In the sectional title environment, the body corporate is the insured. The body corporate usually does not own property; yet by statute, the body corporate must insure the buildings and all improvements to the common property.

The owner has an interest in the buildings as much as the bank does if so bonded but the body corporate is in control. Therefore, the insurance must satisfy the banker or lender that – in the in case of loss – the lender’s debt will be settled.