The Association of British Insurers (ABI) has shared an update on the positive impact of the insurance industry’s Fire Safety Reinsurance Facility for high-risk residential buildings one year after its launch
Described as a “commercial intervention” by insurers to help improve insurance availability for high-risk residential buildings, including those identified as having combustible cladding, the ABI shares that the Fire Safety Reinsurance Facility has seen considerable progress in offering a viable route for leaseholders who have previously struggled to secure building insurance since its launch on 1 April 2024.
In the first nine months, the Facility had underwritten £14.9 billion worth of high-risk buildings. 680 buildings have entered the scheme, including those with fire safety issues that would otherwise have not been covered by insurance, with the ABI sharing that there has been some “evidence of reduced premiums for leaseholders”.
Intended to run for the next two to four years while remediation work takes place, the Facility looks to improve capacity in the multi-occupancy buildings insurance market, and works with insurers such as Allianz, Aviva, Axa, RSA, and Zurich to spread the risk that unsafe buildings pose. Doing so has helped to address some of the complications arising from ‘layered’ insurance, a key reason behind increased premiums for high-risk buildings. Rather than multiple insurers covering one building, one insurer via the Facility can offer complete coverage. The ABI shares one example where a residential building containing 144 flats has seen a premium reduction of 28% and improved cover.
The ABI believes an increase in capacity for insurers can encourage competition in the market, which over time could “lead to a reduction in insurance costs for those leaseholders in buildings that have been worst affected by fire safety issues”.
ABI Director General Hannah Gurga said: “The financial and emotional strain that leaseholders have experienced while living in buildings with high fire risks is something that our industry is very aware of and remains determined to do what it can to address.
“The launch of the Fire Safety Reinsurance Facility last year was the culmination of extensive efforts by McGill and Partners and the wider insurance industry to support those affected, and I’m encouraged to see the progress it has made within its first year.”
Founder and CEO of McGill and Partners, Steve McGill CBE, said: "One year after launching the Fire Safety Reinsurance Facility, it’s incredibly rewarding to see the tangible benefits it has delivered for leaseholders facing insurance challenges due to fire safety risks. I'm immensely proud of what our team at McGill and Partners has achieved in improving insurance outcomes, and we remain dedicated to driving further progress in this critical area.
“As specialists in developing innovative solutions for complex and high-risk scenarios, we will continue working closely with our insurer and reinsurer partners to expand access to affordable, comprehensive cover in our industry. In the first year, the Facility has proven itself as a competitive market solution to drive a positive impact, and we are excited to build on its success in the years ahead."
While the Facility is a short-term solution to help leaseholders, the ABI adds that greater emphasis is needed on both life safety and property safety: “The industry has long maintained that remediation to a standard that protects both lives and property remains the only long-term solution. The current focus on ensuring people can escape the building in the event of a fire is essential. However, insurers have to also consider the impact a fire would have on the building when setting premiums.
“We have urged the UK’s governments to factor the fire risk for the entire building into remediation standards, to improve its resilience and reduce the risk of fire damage to the building, and people’s homes. Fundamentally, everyone deserves to live in safe buildings. If a building is made resilient beyond the minimum standard required for life safety, it will have a lower risk, which is reflected in the cost of insurance premiums.”
As part of its Remediation Acceleration Plan announced in December 2024, the government outlined its intention to engage with insurers and explore “options for how it could further assist the insurance industry to tackle high premiums for the duration of the remediation programmes”.
A report on how the industry assesses fire risks by the ABI and the FPA is expected later this year.
You can read our article on the Fire Safety Reinsurance Facility, which appeared in the May 2024 issue of the Fire and Risk Management journal, here.