Mansion impossible: Temporary HNW housing shortage tests industry agility

Insurers and brokers are grappling with rising pressure to source appropriate temporary accommodation for high net worth (HNW) clients after supply shortages in prime UK regions continue to escalate claims costs and delay restoration processes.

Temporary accommodation is typically provided to insureds, via their insurer, after an unforeseen event means their primary home is uninhabitable – this situation would usually arise following significant fire or flood events, for example, while the property damage was being assessed and then repaired.

The short-term accommodation offered to insureds in this way is normally on a like for like basis and should be similar in standard to the primary insured home.

However, the “availability of suitable accommodation is becoming more challenging” specifically in the HNW arena, according to Christopher Hawkes, head of private client claims at insurer Aviva.

This trend is particularly pronounced in London and affluent parts of the south east and north west, he noted, where a lack of comparable rental stock to original HNW properties has become a pinch point for claims handlers supporting HNW policyholders.

In terms of why this has become a particular issue, Peter Young, account executive for private clients at intermediary Jensten Group, explained that HNW homes often feature numerous bedrooms, high-end leisure facilities and are located in areas known for privacy, exclusivity and access to top-tier amenities.

“Finding a temporary home with an equivalent number of bedrooms, especially in a short-term rental market, is often difficult,” Young said. “Leisure facilities like gyms, swimming pools or home theatres are generally not included in standard temporary accommodation and require significant research or upgrades to replicate.

”London boroughs are facing an emergency situation with soaring costs for temporary accommodation.”

Sara Bailey, head of private clients at loss adjusting firm Woodgate and Clark, added that the demand from HNW individuals for high levels of discretion and security – alongside the need to maintain lifestyle standards – further narrows the field for suitable temporary accommodation opportunities.

“Standard serviced apartments or short-term rentals may not meet security, exclusivity or anonymity needs,” she said. 

“Alternative accommodation must account for disruption to lifestyle – it is not just a case of finding a property with the right number of bedrooms”.

Inflationary impact

Bailey added that while HNW policies often offer generous sublimits for alternative accommodation, the reality of today’s rental prices in cities like London or rural estates can quickly exhaust available allowances.

According to Young, local authorities in the capital are already seeing “emergency” levels of temporary housing spend. “Spending [has] increased dramatically”, he said, driven by a “severe shortage of suitable accommodation and a growing reliance on B&Bs”.

Helena Evans, managing director at Criterion Adjusters, highlighted the knock-on effect this trend is having on HNW claim costs. “Most of the short-term lets are now at least 12 months. If the works would have only taken six months, but you can only get a 12-month let, you have to pay for that full 12 months – even if you don’t need it for that long,” she said.

This problem becomes even more acute during surge events or seasonal pressures. Evans continued: “In a surge situation – like the London floods [in 2021] – everybody in a few streets [is] looking for similar accommodation and there’s a limit to high net worth accommodation in one area.

“Events like [two-week tennis tournament] Wimbledon can make short-term accommodation harder to find [too].”

Liz Tytler, network operations director at Movo Partnership, agreed with Evans. She warned that major events – such as when singing competition Eurovision was held in Liverpool in 2023 – can distort the short-term rental market, pushing up prices and limiting availability.

Furthermore, she noted that even rural or coastal locations popular with affluent homeowners are seeing temporary accommodation constraints.

“If you have an incident in a high net worth property in Cornwall, there are so many small cottages and homes that are rented out for tourists that high net worth properties aren’t available in those locations,” she said.

Exceptional demands

Many insurers are increasingly offering cash settlements to affected clients in response to these challenges.

Young believes “this allows policyholders more control over their restoration process”, especially if like for like accommodation cannot be sourced quickly.

Plus, despite the luxury nature of their properties, HNW clients are not always rigid in their temporary accommodation expectations. “While they often seek like for like replacements, they are more likely to be open to compromise if it aligns with their overall goals,” Young added.

Nevertheless, some HNW property claims present unique logistical hurdles. One recent case Young was involved with, for example, featured a prominent music industry figure who required a professional recording studio in their temporary home. This request was met with some outside the box thinking.

“We accomplished it by negotiating with another client who was in the same industry and was able to provide their second home for the duration of the claim period,” Young explained.

It is evident that insurers and brokers operating in the HNW arena will need to continue evolving their approaches to ensure client satisfaction while also managing the potential for spiralling claims costs.