UK government urged to support new reinsurance panel for combustible clad buildings

A new reinsurance facility covering commercial and residential buildings cladded in combustible materials has been launched in the UK, more than six years after fire safety issues were exposed by the Grenfell Tower tragedy in London. Announcing the new scheme, the Association of British Insurers (ABI) called on the UK government for more action to help affected buildings. The Fire Safety Reinsurance Facility will be ready to launch from 1 April, driven by broker McGill and Partners. The panel will be led by Swiss Re and is intended to expand capacity for insurers that have continued to write business for buildings with combustible cladding – Allianz, Aviva, AXA, RSA and Zurich. This should foster competition so that more firms offer cover to leaseholders who are struggling with rising rates and falling limits. But the announcement made clear that the facility is temporary: “The ultimate solution remains the urgent need for works to take place to make buildings safe and resilient,” said the ABI. The facility is expected to run for between three and five years while remediation work takes place. The ABI said government could pull other levers to provide a “more immediate impact for leaseholders”. It called on government to provide financial support to increase market confidence in the facility and cut tax on insurance premiums to provide an instant 12% reduction in costs for policyholders. Mervyn Skeet, director of general insurance at the ABI, said: “The industry has been determined in its efforts to support leaseholders, but it cannot solve the issue alone. Establishing the facility is a significant step forward, but government intervention and swifter remediation is still the only long-term solution. We strongly encourage government to consider how it can support the facility to boost confidence in the market or remove Insurance Premium Tax for affected buildings, to offer more immediate relief to leaseholders.” The five participating insurers will put the high-risk buildings that they insure into the reinsurance facility at their next renewal. Since the Grenfell Tower fire and subsequent investigations and reviews, policyholders have seen their cover limits cuts, with brokers, freeholders and managing agents sourcing insurance from multiple firms to find sufficient cover. The ABI said the facility “will enable insurers to expand the capacity they have for writing insurance for affected buildings and take on new business”. “We have long recognised the emotional and financial strain that is being placed on leaseholders in England, Wales and Northern Ireland and flat owners in Scotland… While the launch of the facility is an important milestone, we have always said that there will be no single insurance intervention that will help all leaseholders equally,” it added. The ABI said buildings that have used expensive layering to secure enough cover will see the biggest impact on their premium from the new facility, while buildings that have retained one insurer may not see a significant impact. Steve McGill, founder & CEO of McGill and Partners, said: “Insuring cladded, multi-occupancy buildings that pose a fire safety risk has challenged our industry for some time. However, this unique facility aims to present a competitive market solution that will address this important issue. Contributing to the expansion of insurance availability for buildings with combustible cladding and other fire safety issues has been a significant priority for us.”

UK government urged to support new reinsurance panel for combustible clad buildings

Scheme aims to reduce cost of insurance until remediation work completes

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