Reinsurance facility set for rollout over six years post-Grenfell

"Intervention" aimed at improving availability of cover

Reinsurance facility set for rollout over six years post-Grenfell


By Terry Gangcuangco

Amid significant fire risks in buildings with combustible cladding – as evidenced by 2017’s Grenfell Tower (pictured) blaze and the subsequent Dame Judith Hackitt Review – the insurance industry is making what the Association of British Insurers (ABI) calls an “intervention” by setting up the Fire Safety Reinsurance Facility.

Set to be launched next month, the McGill and Partners facility is supported by the ABI and the British Insurance Brokers’ Association (BIBA). The participating insurers are Allianz, Aviva, AXA, RSA, and Zurich, while the reinsurance panel is led by Swiss Re.

“The facility will enable insurers to expand the capacity they have for writing insurance for affected buildings and take on new business,” the ABI noted. “Over the course of the following 12 months, the insurers will consider which additional buildings can be entered into the facility as and when their insurance policies are due for renewal.”       

Aside from expanding capacity for those already providing cover, the facility is also aimed at fostering competition to get more insurers writing business for affected properties.

The ABI highlighted that buildings whose coverage is split among multiple companies are poised to greatly benefit, with cover provided by the facility replacing costly “layered” insurance.

“Supporting leaseholders and making insurance more widely available for higher-risk buildings with fire safety issues has been one of the ABI’s top priorities,” ABI general insurance director Mervyn Skeet said.

“I’m grateful to McGill and Partners and all the firms involved for their help in establishing this commercial intervention and hope it will encourage more insurers to enter the market and offer cover for these buildings.

“The industry has been determined in its efforts to support leaseholders, but it cannot solve the issue alone. Establishing the facility is a significant step forward, but government intervention and swifter remediation is still the only long-term solution.”

McGill and Partners founder and chief executive Steve McGill CBE, “incredibly proud” of the (re)insurance broker’s role, acknowledged that insuring higher-risk cladded buildings has been an industry challenge for some time. He called the facility “much needed”.

“We are delighted with this new facility, which is the culmination of two years of constructive collaboration between BIBA, McGill and Partners, the ABI, expert real-estate brokers, and Government,” BIBA CEO Graeme Trudgill commented.

“Launching the facility was a key BIBA commitment in our 2024 Manifesto and aims to create a more affordable insurance solution for medium and high-rise residential buildings that have fire safety issues. We hope that in the longer term this will have positive affect on leaseholders.”

For Swiss Re’s Aidan Kerr, the facility is “a great demonstration” of how the industry can work together to help support leaseholders in need of cover while their fire safety issues are rectified through remediation work.

Confirming Aviva’s participation, commercial lines chief underwriting officer Mark Dunham said: “Aviva understands the difficulties faced by residents living in buildings with combustible cladding or other fire safety risks. In April 2021, we became the first major insurer to provide fairly priced insurance for existing and new customers living in buildings with combustible cladding.

“Since then, we have been offering capacity in line with that available from the facility, by providing insurance up to the full rebuilding cost of the building. We welcome the additional capacity available in the market and are participating in the fire safety reinsurance scheme.”

With a focus on multi-occupancy residential buildings facing fire safety issues, the facility is expected to be operational for three to five years during the remediation period.

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