Fire Safety Reinsurance Facility

If you are responsible for purchasing the buildings insurance for the building (usually this is the freeholder or managing agent), you should speak to your existing broker or insurer in advance of your next renewal.   

Your broker or insurer will be able to discuss whether the building can be covered by the Facility, or, for brokers, if they can find you an alternative competitive deal elsewhere. Brokers will demonstrate that the policy they recommend offers fair value for their customers. 

The Facility has been designed to help multi-occupancy residential buildings where fire safety issues have been identified and remediation is required. While there are no specific criteria that a building needs to meet, any building where the owner has a legal duty to remediate it to make sure it is safe will need to have a remediation plan in place.  

It will remain a commercial decision on a case-by-case basis for each individual insurer to decide whether to enter a building into the Facility, taking into account other risks associated with that building (for example floods or storms), other buildings they might insure and their overall ability to provide cover for these buildings should there be a major incident with an associated high-cost claim.  

Premiums are calculated by insurers on an individual, case-by-case basis taking into account a range of factors and the Facility operates in the same way. The final costs leaseholders are asked to pay will include the premium as set out by the insurers involved in the Facility, as well as any additional fees and costs charged by others in the supply chain such as brokers and managing agents. We expect any additional charges for leaseholders to be clearly set out and to demonstrate fair value. 

As with all buildings insurance policies, premiums will continue to be based on a variety of risk factors, such as the rebuilding cost, type and age of the building, previous claims history and other property risks such as storms or flooding and the risk of subsidence or escape of water. External factors such as construction costs and supply shortages will also impact premiums for buildings entered into the Facility, as with any other building. 

More information on what buildings insurance policies cover is available here. 

The Facility has been designed to work when the buildings insurance comes up for renewal.  When a policy is due for renewal, we’d advise those responsible for purchasing buildings insurance to speak with their broker or insurer.

Whoever is responsible for purchasing buildings insurance should continue to work with their broker, or their insurer where the policy has previously been arranged directly. Brokers are best placed to look across the whole market and provide advice on the most appropriate cover for the building’s needs. 

If you need to find an insurance broker contact BIBA’s Find Insurance Service on 0370 950 1790 or online.   

Yes. Insurance Premium Tax is 12% of the premium and is set by the government. Whilst the ABI has called on them to consider removing the tax for such building insurance policies, which would instantly result in 12% reduction for all those impacted, for now IPT continues to apply. 

One of the drivers behind increased insurance costs has been the lack of capacity within the buildings insurance market to take on the risk of affected buildings. Where there are fire safety issues such as combustible cladding or insulation or missing fire breaks, the risk of the whole building being destroyed in the event of a fire remains significant. Some insurers who provide this cover have been unable to solely take on the risk for such a building. Some insurers have been able to share the risk with other firms, but we know that this has resulted in expensive ‘layered’ insurance.  

The Facility looks to reverse this. Firstly, when a building is entered into the Facility one insurance firm will more likely be able to provide 100% of the cover for a building on its own again as a group of reinsurers will share the risk with them. Secondly, it should help to increase the amount of capacity within the market to offer cover to more buildings. In doing so, it is hoped to boost competition within the wider industry and, in the longer term, encourage more insurers to start offering cover again – either through joining the facility or on their own. 

The Facility will be time-limited to between three to five years whilst work to fix fire safety issues on buildings takes place. We continue to urge the government and developers to progress this work as swiftly as possible as, ultimately, remediating to reduce the fire risk on the buildings is the only solution.

Insurers will proactively consider which of the buildings they currently insure would be suitable to be entered into the Facility. The person who arranges the buildings insurance, should also contact their broker or insurer at the point of renewal. We will be working with the firms involved, and the British Insurance Brokers’ Association will ensure brokers are aware of the facility.

Leaseholders should contact the person or company who would usually arrange the buildings insurance to understand what type of insurance their building has. It is unlikely that the leaseholder would be informed if their building was in the Facility or not – insurers do not usually share how reinsurance is operating to a customer. 

We continue to support the FCA’s work to ensure leaseholders have sufficient information about the policy and join their call to make it a legislative requirement for freeholders to share relevant information with their leaseholders. 

The Leasehold Advisory Service should provide advice to those who do not believe their freeholder is acting in their best interests.  Further information is available at https://www.lease-advice.org/.  

Any insurance company interested in knowing more about joining should contact McGill and Partners. 

The Facility is open to any UK insurance firm. ABI members are the founding firms but we hope in time more insurers, whether ABI members or not, will either join or look to offer competitive prices in the wider market. 

We have previously confirmed that a number of insurers, including the five firms involved in the facility, have committed to review the premium for high-risk residential buildings once all building safety works have been completed to a sufficient standard.  

If customers would like to switch insurers after remediation works have taken place, then the same firms have committed to waive any mid-term cancellation fees that might be included in the policy for that particular building. This will mean that building managers, and ultimately leaseholders, can benefit from the potential to obtain a wider range of insurance quotes from the moment the building has been made safer through remediation. 

Our members will want to see that a building has been repaired to a standard that saves both lives and the property. Life safety is the priority to ensure everyone can be safely evacuated, but insurers would also want to see changes that prevent the whole building from being damaged.