A new initiative aims to help improve the availability of insurance for higher-risk buildings awaiting work to fix fire safety issues.
The Fire Safety Reinsurance Facility will help to increase insurance market competition to cover properties affected by combustible cladding and other fire safety issues, the Association of British Insurers (ABI) said.
It has been established by reinsurance broker McGill and Partners with support from the ABI and the British Insurance Brokers’ Association (Biba), which will help to ensure brokers are aware of it.
The facility has been designed to help multi-occupancy residential buildings where fire safety issues have been identified and remediation is required.
The initiative aims to expand capacity for insurers already writing business for affected buildings and to encourage competition, so that more firms will provide cover.
It is expected to run for three to five years, while works are carried out to make buildings more safe and resilient.
The first step will be for the participating insurers – Allianz, Aviva, Axa, RSA and Zurich – to enter the higher-risk buildings that they currently insure, and which are awaiting remediation works, into the initiative at the point of their annual renewal.
It will be a commercial decision on a case-by-case basis for individual insurers to decide whether to enter a building into the facility.
The Grenfell tragedy and Dame Judith Hackitt Review exposed significant construction and fire-risk issues related to some buildings – and insurers have had to consider the heightened risk of an entire building being destroyed and limit the amount of cover provided by individual firms, the ABI said.
Due to the high risks involved, brokers, freeholders and managing agents have previously had to source insurance cover from multiple firms, meaning that several insurers may be involved in covering one building, creating a “layered” effect and adding to costs.
The ABI said it is these buildings which will likely benefit most from the new initiative.
In the longer term, it is hoped that the facility will reinvigorate competition and encourage other firms to write more business for affected buildings.
Leaseholders should contact the person or company responsible for arranging their insurance cover, who can then discuss the facility with their broker or insurer, the ABI said.
When the buildings insurance policy is due for renewal, the person or company responsible for arranging the insurance cover should contact their existing broker or insurer as usual, the ABI said.
Insurers will proactively consider which of the buildings they currently insure would be suitable to be entered into the facility at the point of renewal.
Where a broker is used, the broker should also speak with participating insurers to see if the building can be considered for entry, alongside looking across the wider market as usual to find the right cover for the building’s needs.
The broker will provide recommendations to the person or company responsible for arranging the insurance cover as they usually would.
The facility will be available for properties across England, Wales, Scotland and Northern Ireland.
Buildings insurance premiums will continue to be based on a variety of risk factors, such as the type and age of the building, previous claims history and other property risks, the ABI said.
Tim Bailey, president of the ABI, said: “The Fire Safety Reinsurance Facility has been a priority cross-industry project to expand capacity in the market and boost competition.
“We’re pleased to have made the facility a reality in order to support leaseholders and as ABI president, I’m grateful to all those involved.”
Graeme Trudgill, chief executive at Biba, said: “We are delighted with this new facility, which is the culmination of two years of constructive collaboration between Biba, McGill and Partners, the ABI, expert real-estate brokers and Government.
“Launching the facility was a key Biba commitment in our 2024 manifesto and aims to create a more affordable insurance solution for medium and high-rise residential buildings that have fire safety issues.
” We hope that in the longer term this will have positive affect on leaseholders.”
More information is at www.abi.org.uk/products-and-issues/choosing-the-right-insurance/home-insurance/buildings-insurance/fire-safety-reinsurance-facility/.