Sep

Report sheds light on soaring insurance premiums for cladding-hit landlords

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Insurers’ reluctance to cover buildings with flammable cladding has resulted in soaring premiums for affected leaseholders – including thousands of landlords – since the Grenfell tragedy, a new report has found.

Buyers, including property managing agents and freeholders, are finding it more difficult to get insurance, according to the Financial Conduct Authority’s (FCA) study into the insurance of multi-occupancy buildings.

It reports that the mean premium across multi-occupancy buildings with flammable cladding jumped by 187% from £26,300 in 2016 to £75,600 in 2021.

The FCA details high commissions charged by insurance brokers, and the practice of sharing these commissions with freeholders and managing agents. It says this inflates premiums paid by leaseholders, who often have limited visibility on why a particular insurance policy is chosen or few routes to challenge the insurance costs passed on to them by freeholders.

Challenge costs

It suggests cross-industry risk pooling as a way to share risk across multiple insurers and adds that leaseholders should be able to challenge insurance costs, possibly through an independent alternative dispute resolution mechanism.

Housing Minister Simon Clarke says he is committed to taking action against abuses and promises to provide an update in the autumn on the available options. “The financial pressure currently placed on leaseholders continues to be unacceptable and I want to ensure that we rectify the issues outlined in the report as a matter of urgency,” says Clarke.

James Dalton, Association of British Insurers’ director of general insurance policy (pictured), says the analysis provides a clear recognition that there is no evidence to suggest insurers are making excessive profits.

But he adds: “We remain acutely aware of the challenges leaseholders affected by the cladding and fire safety crisis are facing and support the FCA’s recommendations on a risk-sharing scheme.”

Read the FCA report in full.

View Full Article: Report sheds light on soaring insurance premiums for cladding-hit landlords