Media Release 16 September 2021
IUA SURVEY SHOWS CAUTIOUS SUPPORT FOR BUILDING RECLADDING
BUT URGES CONSTRUCTION SECTOR TO DO MORE
Insurers have revealed a cautious willingness to underwrite fire safety risks on new projects to remove defective cladding from high rise buildings. Around two thirds of respondents to a survey by the International Underwriting Association (IUA) stated they would provide a limited form of cover, whilst a further 4% are happy to offer unrestricted protection.
But the construction industry still needs to show it has addressed failings exposed by the Grenfell Tower tragedy, IUA members believe. Responding to Government concerns about the pace of building cladding remediation, they have called for a greater focus on quality over cost to make it easier for underwriters providing coverage.
The market for construction professional indemnity insurance remains circumspect, reflecting concerns about the potential for historic liabilities to develop into future claims. Underwriters are maintaining a selective approach to new risks, analysing carefully the safety reputation of clients, their portfolio of work and the risk management processes they have in place.
Three quarters of survey respondents feel the construction industry has not yet learnt the lessons of Grenfell. Questions remain about accountability, supply chain management and a ‘lowest cost culture’.
“Underwriters are keen to provide insurance coverage to the construction sector, but are clearly looking to select those clients that can demonstrate a professional and robust approach to risk management,” commented Chris Jones, the IUA’s Director of Market and Legal Services.
“There is an expectation that the Building Safety Bill will help resolve issues of accountability for safety measures and introduce new rules that encourage an investment in quality construction. Yet the legislation may also retroactively extend historic liabilities, further hindering insurers’ appetite for this class of business.
Michael Atwell, Chair of the IUA’s Construction Professional Lines Working Group, said: “Insurers are still grappling with the development of existing claims and the systemic industry problems revealed in the wake of Grenfell will undoubtedly take time to resolve. There is still a perception that tight margins, driven by both contractors and their customers, mean cost is often more important than quality.
“Insurance capacity, however, is available if the construction industry can do more to explain how it has changed as a result of Grenfell and also adopt a more sustainable approach to profitability. The sector is extremely fragmented which makes engagement difficult, but we are committed to working with both industry and government and look forward to discussing our survey results in greater detail.”
The IUA’s Construction Professional Lines Working Group was established in 2019 to encourage greater engagement between insurers, government, regulators and construction firms. It surveyed 26 underwriters active in the sector across the association’s member firms.
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International Underwriting Association
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Notes to Editors:
About the IUA
The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.
The IUA’s London Company Market Statistics Report shows that overall premium income for the company market in 2019 was £27.633bn. Gross premium written in London totalled £21.436bn while a further £6.197bn was identified as written in other locations but overseen by London operations.