IUA members have called for a greater focus on quality over cost to make it easier for underwriters providing cover for remediation projects

Insurers have shown a ”cautious willingness” to underwrite fire safety risks on new projects to remove defective cladding from high-rise buildings, according to the latest survey by the International Underwriting Association of London (IUA).

The research surveyed 26 underwriters active in the sector across the association’s member firms. It revealed that around two-thirds of respondents said they would provide a limited form of cover for work to remove defective cladding, while a further 4% are happy to offer unrestricted protection.

According to IUA members, the construction industry still needs to show it has addressed the failings exposed by the Grenfell Tower tragedy.

Therefore, members have called for a greater focus on the quality of cover for remediation projects rather than concentrating on cost, to make it easier for underwriters to provide cover.

This follows government concerns about the pace of building cladding remediation.

Chris Jones, the IUA’s director of market and legal services, said: “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.”

“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.”

Circumspect

The market for construction professional indemnity insurance remains circumspect – reflecting concerns about the potential for historic liabilities to develop into future claims.

Meanwhile, 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 arising from the Grenfell Tower fire in 2017. Questions remain about accountability, supply chain management and a ‘lowest cost culture’, they said.

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.”

Established in 2019, the IUA’s construction professional lines working group aims to encourage greater engagement between insurers, government, regulators and construction firms.