The new professional indemnity scheme will fix the issue of a stalled mortgage market for mid and high-rise buildings, says chief executive

Underwriting agency MGAM has today (26 September 2022) launched a new government backed professional indemnity (PI) scheme for external wall system fire review certificate assessors alongside global reinsurer Scor, broker Aon and the government’s Department for Leveling Up, Housing and Communities (DLUHC).

It has been launched in response to the significant shortage of insurers providing PI cover to firms undertaking assessments of external wall systems for mid-and high-rise residential buildings, known as EWS1 forms. 

EWS1 forms were developed by the Royal Institution of Chartered Surveyors (RICS), UK Finance and the Building Societies Association to support the valuation process for high-rise residential buildings with dangerous cladding and help mortgage lenders to assess the external wall safety of buildings over 18 meters.

Mortgage assessors can then decide whether to offer a mortgage on any given apartment within multi-storey, multi-occupancy residential buildings.

Aon is acting as the government’s insurance advisor for the scheme.

Julie Page, Aon UK’s chief executive, said: “We were excited to be asked by the DLUHC to provide advisory services for the development of the PI scheme. Building this sustainable solution addresses an important protection gap in the market and this collaborative effort – along with MGAM and Scor – shows the power of public private partnerships.

“The solution itself will also help alleviate the pressure on a significant proportion of affected leaseholders who are currently unable to sell or re-mortgage their properties – and allows us to play a part in addressing issues impacting people’s lives.”

Protection gap

The new PI scheme was initially announced in June 2022.

Jason Anthony, MGAM’s chief executive, said: ”The property market has been stalled for some time now due to this protection gap and we fully intend for this scheme to fix this issue, allowing property buyers to secure the necessary certification in order to secure a mortgage.”

MGAM won the government tender to develop this PI scheme for EWS1 assessors. 

Meanwhile, Romain Launay, chief executive for specialty insurance at Scor Property and Casualty, said: “The impacts of this will be felt widely and Scor is proud to partner with the DLUHC and MGAM to deliver this reduction in the protection gap for the ultimate benefit of society.”

Launay added the PI scheme will allow the necessary fire safety assessments to be carried out, enabling for the purchase, sale or re-mortgage of homes that will free up a vital segment of the property market.

The new PI scheme will last for five years, after which it is anticipated that insurers will step back into the market, removing the requirement for state backing.

Paul Scully, minister of DLUHC, said: “For far too long leaseholders in high rise buildings have been stuck in limbo, unable to secure mortgages on their properties, sell up and move on to their next step.

“It is for these leaseholders that we have launched this new indemnity scheme today. This scheme will give EWS1 assessors the confidence to exercise their professional judgement, speed up the sale of flats and allow lenders to lend with confidence.”