Posts tagged: Fire safety

Insurance cover for fire-risk buildings extended

The Association of British Insurers (ABI) has reported that the UK’s Fire Safety Reinsurance Facility has raised its maximum cover limit from £50 million to £75 million.

The Facility, which was introduced in April 2024, was created to support insurance availability for high-risk multi-occupancy buildings with known fire safety issues.

The change was made following joint discussions between McGill and Partners, which developed the scheme, and the insurers participating in it.

According to ABI, the increase is aimed at allowing more buildings to qualify for cover while remediation efforts are ongoing.

ABI stated that over 760 buildings with a combined insurance value of £17.1 billion were entered into the Facility in its first year of operation.

More buildings now eligible for protection

ABI confirmed that some buildings initially identified as eligible could not be covered under the previous limit.

The organisation said that raising the cover threshold will help address this, particularly for properties requiring higher-value insurance arrangements.

McGill and Partners said the change was made possible through collaboration across the market and reflected the Facility’s impact in its first year.

Steve McGill CBE, Chief Executive Officer at McGill and Partners, said: “The Fire Safety Reinsurance Facility is something we are hugely proud of as a firm.

“Providing a solution to an issue that was so concerning to leaseholders and challenging for the insurance sector alike, is testimony to the way we do business.

“The very fact that we have been able to increase the limits is evidence to the success of the Facility itself.

“This success has enabled us to collaborate with the market to enhance the limits for those insurers who are part of the Facility, allowing greater risk transfer for them and creating further benefits for those involved in the future.”

Leaseholders and brokers see reduced premiums

British Insurance Brokers’ Association (BIBA) Chief Executive Graeme Trudgill said its members had actively used the Facility over the past year.

Trudgill commented: “Our members have made active use of the new Facility over the past twelve months and tell us that it is making a real difference, helping reduce premiums in many cases which brings a direct financial benefit to hard pressed leaseholders.

“The Facility is a great example of industry innovation and collaboration to solve a difficult problem.

“The additional capacity now available will reduce the need for brokers to arrange facultative excess of loss reinsurance, further helping to bring down the overall cost of the placement.”

According to ABI, the increased capacity could encourage more insurers to participate, leading to wider market competition.

It said this could improve access to cover for buildings awaiting remediation and reduce financial pressures on leaseholders in England, Wales and Northern Ireland, as well as owners in Scotland.

Industry reiterates importance of remediation

The ABI reiterated that the Facility is not a permanent solution.

It said long-term improvements to building safety must come through completed remediation, supported by government programmes in all UK nations.

The industry body stated that only buildings meeting a higher standard of fire resilience will be eligible for conventional insurance cover without needing the Facility.

Hannah Gurga, Director General at ABI, said: “The tragic fire at Grenfell Tower exposed critical failures in the building safety regime.

“As a result, insurers had to reassess their understanding of the risk these buildings posed, and leaseholders have shouldered the financial and emotional burden of living in homes that weren’t as safe as they first thought.

“By establishing the Fire Safety Reinsurance Facility, the industry is working to improve capacity in the market for multi-occupancy buildings and, by extension, support leaseholders.

“Increasing the cover limit to £75 million is a significant step and I hope this will mean that more buildings and leaseholders can be supported while remediation work takes place.”

Call for alignment on remediation standards

The ABI has urged government to align remediation requirements with insurer expectations regarding fire risk.

In its latest publication, Assessing the fire risk of cladding systems: an insurance perspective, the ABI outlined how its assessments often go beyond what current building regulations require.

The report, created in partnership with the Fire Protection Association (FPA), recommends full removal of combustible materials from external walls to limit the potential for fire spread.

The ABI called for these concerns to be considered within the Remediation Acceleration Plan and equivalent programmes across the devolved nations.

Swiss Re, which acts as lead reinsurer for the Facility, said expanding the scheme would increase access to necessary cover.

Aidan Kerr, Director of Public Sector Solutions at Swiss Re, said: “The Fire Safety Reinsurance Facility continues to play a crucial role in ensuring cover remains available for residents of multi-occupancy buildings, whilst the crucial remediation work takes place.

“With this expansion of the Facility, even more affected buildings and their residents can have access to the vital protection that insurance provides.

“Swiss Re is proud to be the lead reinsurer for the Fire Safety Reinsurance Facility; it’s a great example of how the insurance industry can come together to help solve some of the most pressing problems across the UK.”

UK fire safety reinsurance Facility increases cover limit to £75 million: Summary

The Fire Safety Reinsurance Facility has increased its cover limit from £50 million to £75 million.

The change was confirmed by the Association of British Insurers.

McGill and Partners developed the scheme with support from insurers.

The Facility was launched in April 2024.

It covers multi-occupancy buildings with known fire safety risks.

Over 760 buildings were entered into the scheme in its first year.

The combined value of insured buildings reached £17.1 billion.

The new limit will allow more high-value buildings to access cover.

The British Insurance Brokers’ Association said it helped reduce premiums.

The ABI stated that remediation remains the long-term solution.

Swiss Re is the Facility’s lead reinsurer.

The ABI published a report with the FPA about fire risk in cladding.

It recommends removing combustible materials from building exteriors.

The ABI urged government to reflect these standards in its remediation plans.

The Facility aims to be phased out once risks are fully addressed.