Buildings insurance

Buildings insurance renewal

This page explains to leaseholders: 

  • the problems we've had in arranging insurance for our residential blocks 
  • that we've agreed an insurance contract with Protector Insurance 
  • that we've applied to the Residential Property Tribunal to consider how this contract complies with the leasehold consultation regulations

Previous insurance with Zurich

Since 2018, we’ve had a contract with Zurich Insurance Group to provide building insurance for our residential blocks. The insurance covers risks that could affect the building including:

  • fire 
  • lightning 
  • explosion or earthquake 
  • aircraft collision 
  • storm, wind or flood 
  • subsidence 
  • some accidental damage 

Zurich’s contract ended on 31 March 2023 and last year they told us they wouldn't be retendering for this contract because they're re-positioning themselves in the property market.

This reflects the public sector residential insurance market generally, where insurance providers have decided to concentrate on other types of insurance.  

Procurement of a replacement contract

When we invited tenders to replace Zurich in November 2022, we didn't receive any bids.  

Failure to provide insurance cover causes substantial problems:

  • the lease requires us to keep the buildings insured for leaseholders and doesn’t allow alternatives such as self-insurance where we would meet the cost rather than an insurance company, charging an appropriate premium to leaseholders 
  • if insurance cover wasn't in place, this would also put homeowner’s mortgages at risk, and restrict the re-sale or re-mortgaging of properties insured under the policy

Other alternatives

Another extension with Zurich 

Zurich’s offer was only for three months and the premiums were double that of 2022 to 2023. Their offer was made on the basis that no other offer was received.

London Insurance Consortium

London Insurance Consortium is a group of local authorities who tender collectively for insurance. The Consortium lead informed us they aren't taking on new members now, so this option wasn't available to us.

A tri-borough framework

This is exclusive to three local authorities and therefore wasn’t an option for Southwark

Crown Commercial framework

Crown Commercial doesn't offer leasehold building insurance

The private market

This was a last resort which proved impossible because the level of stock data wasn't available in the detail required to go out to the market.

Protector insurer's offer

On 16 March, Protector Insurance made an offer. We don’t think we'll get another offer, so we've entered into a contract with Protector Insurance from 1 April 2023. 

The rates offered are around double those of the outgoing insurer, Zurich. These costs will be reflected in the service charge adjustments issued in September 2024. 

Your estimated service charge for 2023 to 2024, which was issued in February, included an 11% increase for building insurance in anticipation of an increase in the premiums. 

The extra cost of the premium will be charged within your actual service charge for 2023 to 2024 which is due to be issued in September 2024. You'll be able to pay any actual adjustment debit over the six remaining months of the financial year.

We used to receive a service fee from the insurer to reflect our management of the claims process. This covered our costs in managing the insurance contract.  However, Protector Insurance will be managing the claims process directly, so our costs will be charged as part of the service charge in the future.

The insurance market

  • the leasehold building insurance market is in a so-called hard market phase with:
    • premiums rising significantly
    • restrictions in cover being introduced
    • policy limits
    • excesses being reviewed or introduced; and
    • the withdrawal of capacity with insurers leaving the marketplace
  • inflation is affecting the cost of claims and the cost of property reinstatement values.
  • historically, profitability has been an issue due to the volume of claims and low or zero excesses being commonplace across the sector
  • other local authorities in London are facing similar issues including:
    • increased premiums
    • increased excesses, and
    • difficulty in procuring insurance for leasehold flats
  • the council, along with other London authorities, has written to the Secretary of State to raise concerns about the current conditions of the insurance market
  • we're also carrying out individual property reinstatement valuations, and working to improve our claims experience overall.

Application to the First Tier Property Tribunal (FTT)

We’ll be making an application to the First-tier Property Tribunal who will:

  • make sure that the contract meets the requirements of Section 20 of the Landlord and Tenant Act 1985
  • consider whether to give dispensation on those aspects of Section 20 that we can’t comply with

Documents

See the Notice of Hearing and further Directions dated 5 February 2024 (listed above) for further information on what to do if you wish to attend the Hearing and how to obtain the CVP link from the Tribunal if you wish to attend remotely. 

Take note that the council has made the following application to the Tribunal:

Any leaseholder wishing to object or comment on the application must do so no later than 12 October 2023 by sending their submissions to the Council and to the Tribunal at rpmidland@justice.gov.uk.

More information

More details of the tender process, the market conditions and the approvals process

If you're having difficulty during the current cost of living crisis, you can find help and advice on our cost of living support page.

If you're having difficulty making your service charge payments then please contact your Service Charge Accounts Officer. More information, including a list of independent advice services, can be found on our problems paying your service charges page

 

Page last updated: 23 April 2024

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