Apartment & Leaseholder Risks in Focus For The FCA

The FCA is looking at the insurance risks associated with apartments, especially apartment blocks. These are increasing in numbers as new builds, as they offer a managed solution for Housing Trusts and Councils, keen to promote co-living. Equally many existing apartment blocks offer a long term housing solution for single people, retired couples and those who enjoy an urban lifestyle. The problem can arise when an apartment leaseholder wants to sell the flat and Buildings Insurance can be hard to obtain.

Here’s an extract from the FCA statement;

The Financial Conduct Authority (FCA) has set out a range of recommendations and other potential remedies designed to give leaseholders greater protections from high prices and ensure the buildings insurance market operates better for leaseholders. Since the Grenfell tragedy leaseholders have been faced with substantially increased costs of insurance.

In light of this, the FCA was asked to carry out a review into the market for multiple-occupancy residential buildings insurance and explore ways to provide better value cover for leaseholders.

Sheldon Mills, Executive Director of Consumers and Competition, said:

‘Since the Grenfell tragedy, hundreds of thousands of leaseholders have had to endure the difficulties of living in buildings with known fire safety issues and these problems have been made worse by increases in the cost of their insurance. We will consult on measures to improve transparency for leaseholders about the price of their insurance and how leaseholders can be given greater protection. We expect the insurance industry to work quickly with us and government to develop solutions to this issue, including developing pooling arrangements and reducing commission, that will make affordable insurance cover more widely available.’

The FCA has noted than many insurers have exited the apartment block market since Grenfell. It now proposes a series of measures to improve choice for the consumer.

POOLING THE HMO/CLADDING RISK

The package of recommendations and other potential remedies includes:

  • creating a cross industry pool to limit the risk to individual insurers posed by certain buildings affected by flammable cladding or other material fire safety risks, aimed at reducing the price of insurance for these buildings;
  • increasing the amount and transparency of information available to leaseholders on the pricing of the insurance they are paying for;
  • making it easier for leaseholders to challenge high insurance costs passed on to them; and
  • making leaseholders ‘customers’ of buildings insurance.

The FCA will provide an update on progress towards potential remedies in six months.

ABI COMMENT

James Dalton, ABI Director of General Insurance Policy, says: “We remain acutely aware of the challenges leaseholders affected by the cladding and fire safety crisis are facing. We support the FCA’s recommendations on a risk sharing scheme and have been actively discussing various options with industry and Government. Our work in this area will continue at pace.

“The FCA’s detailed analysis provides important insight on the state of the insurance market for high-rise residential buildings with a clear recognition that there is no evidence to suggest insurers are making excessive profits. We recognise the issues the FCA raises regarding the availability of information on these buildings and will work with our members, regulators and relevant industries to achieve greater consistency in recording data. We are also committed to improving transparency for leaseholders and will work with the FCA to implement a framework that enables this.

“Supporting leaseholders to reduce insurance costs is a priority for us. In the longer term, we continue to urge the Government to progress swifter remediation of buildings to a standard that protects both lives and property as this provides the ultimate solution to high insurance costs.”

 

About alastair walker 9633 Articles
20 years experience as a journalist and magazine editor. I'm your contact for press releases, events, news and commercial opportunities at Insurance-Edge.Net

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