Insurance Renewal 2023
The insurance market for residential blocks remains difficult. Premiums have risen sharply over the last several years, with insurers increasingly aware of the risks posed by unsafe cladding and other building safety defects. Most insurers have reduced their exposure to the sector and will not generally quote for larger buildings which they do not already insure.
Your freeholder is acutely aware of the difficulties faced by many homeowners through insurance bills that are much higher than in the past. We will again work with both of our insurance brokers in pursuit of the best possible result at the March 2023 renewal.
We have included below some FAQ’s for the information of homeowners.
Why have premiums increased for many buildings?
Many homeowners in residential blocks have experienced sharply increased insurance premiums.
This situation is common across the UK, not unique to your landlord’s insurance programme.
The Grenfell Tower tragedy highlighted the extent of fire safety problems in blocks across the country. Insurers are now less inclined to cover such buildings and require increased pricing to do so.
Actual levels of increase are driven by several factors:
• Cladding and related fire safety problems.
• The building sum insured – a high sum insured represents a greater risk to insurers.
• Converted buildings such as former mills are considered higher fire risks.
• Historic claims experience.
• Flood risk profile.
The more of these factors affecting an individual building, the higher the premium rise has been.
Even buildings with none of these features have generally experienced some increase, so premiums have risen across the residential sector.
What is your plan for the 2023 renewal?
We are engaging already with our brokers to assess strategies to achieve a favourable result for our homeowners. We anticipate that the entire process will take at least 3 months to complete. We will communicate through our agents and this website as key milestones are reached, so that homeowners are kept reasonably informed. We are not able however to provide a running commentary on individual buildings
Are you tendering the business in 2023?
We tendered our entire programme in 2018, 2021 and 2022 to all insurers potentially able to underwrite this type of business. Last year, our programme was split, with some properties remaining with Zurich via brokers Arthur J Gallagher (UK) Ltd (AJG) and others transferring to Ecclesiastical via Lockton Companies.
We will again tender the Zurich portfolio. Advice from our brokers is that no benefit will be gained by re-tendering the Ecclesiastical properties.
Many buildings will be marketed to insurers both as part of our wider portfolio and in isolation.
Why do you offer my building to the insurance market as part of your overall portfolio?
There are potentially economies of scale in offering a large portfolio to the insurance market. This approach can secure cover for buildings which could not be insured in isolation. The Financial Conduct Authority recognised the value of this approach in its recent report on insurance for multi-occupancy buildings. As stated however many of our buildings are also offered in isolation. All buildings premiums are priced individually based on their risk to insurers.
Can I see the quotations provided by the insurance market for my property?
Yes, if viable alternatives are available this year.
Can I arrange cover for my building outside of the freeholder programme?
Generally not. It is unlikely that adequate cover could be sourced and your freeholder has selected its chosen insurers on a range of specific criteria. If a homeowner can obtain 3 cheaper alternative quotations however meeting the following criteria, then we may challenge our insurers on their pricing:
• Sight of 3 alternative quotations, detailing policy cover, levels of excess and principal terms, conditions and exclusions.
• A copy of the policy wording on which the quotations are based.
• A copy of the Statement of Fact provided with the quotations.
• If a Statement of Fact is not available or does not specify this, quotations must state in writing what building construction details they are based on, and in particular the presence of any unsafe cladding or associated fire safety risks. No terms will be valid unless insurers have accepted such detail.
• Confirmation of the 3 year claims history provided to insurers. This should be summarised in the Statement of Fact.
• Insurers must have a UK credit rating of S&P A- or better. There have been financial failures of non-rated, non-UK insurers.
What do you expect will happen to premiums?
We don’t know at this stage. Insurers will not answer hypothetical questions this far before renewal. We hope that premium rates have peaked and that some easing may be available, particularly for buildings where remediation programmes are advanced. It should be noted however that inflationary pressures in the cost of building materials and labour will mean insurers requiring higher inflation indexation to sums insured that in the past, with a direct impact on premiums.
Will the insurance declared value of my building increase at renewal and will that affect my premium?
As widely commented in the media, inflation levels in building material and labour costs are increasing sharply. It is essential that the declared value of your building keeps pace with this, to ensure that there are no problems of underinsurance in the event of a claim. Both our insurers require a 10% indexation increase in valuation this renewal, unless a rebuilding cost assessment has been carried out recently. Unfortunately this will produce a proportionate increase in premiums. Some other insurers currently specify higher rates of indexation
What will ultimately cause premiums to reduce?
As remediation work on buildings with safety defects completes over the next several years, we expect premium rates to ease. More insurers should be prepared to compete and existing ones to moderate pricing. We do not however expect premium levels to reduce to historic levels. Insurers generally regard the sector as having been under-priced over a period of years.
The Housing Secretary is taking an active interest in the need for insurance to be available at reasonably affordable prices. He is engaging with major insurers on the subject and has also charged the Financial Conduct Authority to provide analysis and recommendations. We welcome active government pressure.
What is Government doing to address high insurance premiums?
Housing secretary Michael Gove, in his first stint in that role, mandated the Financial Conduct Authority to investigate the cost and availability of insurance for multi-occupancy buildings. It published its initial report in Sept 2022 and has launched a further 6 month consultation. Government has also encouraged insurers to work together to find solutions, including possibly developing a “pooling” mechanism to cover more challenging risks, as has been done historically for some terrorism and flood risks. We welcome any intervention by government to improve the position for homeowners.
Will my premium reduce when remediation work starts on my building?
Not immediately. Insurers will generally require work to be fully complete to an acceptable standard. We will be attempting however to negotiate some form of rebate if work is completed in the middle of a policy year, reflective of the reduced risk. We cannot give any idea of how successful this might be and if so what level of rebate may be on offer.
Will insurers be given all the risk information on my own property?
Yes. We have gone to considerable lengths in recent years to compile detailed construction and building safety information for all our properties. This means that insurers can assess specific risk, and price to reflect that. You can be confident that insurers will have access to any report and information we hold. Where there is a Residents’ Management Company in place and we do not instruct the managing agent, it can be more difficult to obtain this information. We have written recently to all agents reminding them of the importance of responding to information requests if we are to achieve the best pricing.