That’s the general feeling from Markel, who go into some detail below. It all raises questions over the current – and any future – UK government’s ambition to deliver on around a million new homes to meet demand.
Residential developers should be alert to the potential insurance implications of the new Building Safety Levy, which came into effect in England on 1 October 2026.
For SME developers in particular, project budgets may have been agreed well before construction starts. A new statutory cost introduced after those figures were set could alter the economics of the development and, in some cases, expose gaps between the values originally declared and the true cost of delivering the project.
Depending on location and the size of the development, the Building Safety Levy could add tens of thousands of pounds to project costs. A qualifying development with 2,000 sq m of chargeable floorspace would face a levy of about £58,000 in Birmingham, around £76,000 in Basingstoke and Deane and approximately £127,000 in Barnet on non previously developed land, based on published government rates.
For brokers and insurers, figures of this scale make it particularly important to understand whether the values originally declared for a project still reflect the current financial exposure.
While much of the immediate focus is likely to be on the financial impact of the levy itself, Markel believes brokers should also consider what the additional cost could mean for the wider insurance position of a project.
Markel’s UK Head of Construction Underwriting, Greg O’Neill said:
“The Building Safety Levy is likely to prompt a lot of discussion around margins and project viability, but brokers should also consider if the figures underpinning a client’s insurance still reflect the current position.
“Smaller developers with less internal resource dedicated to insurance and risk management may not have the time to sufficiently review project values as costs, potentially exposing themselves to underinsurance. Brokers need visibility of changes in project costs and circumstances so the insurance can be reviewed on an informed basis.”
Applications submitted before 1 October will generally sit outside the levy regime. However, developers who sought to submit applications before the deadline will still have needed to ensure those applications were complete and valid. If an application is rejected or invalidated and later resubmitted after the 1st October, the charge may still apply.
That creates another area of uncertainty for developers whose projects are close to the deadline, particularly where the final cost position remains fluid.
O’Neill added:
“This is a good example of why declared values should not be treated as a one-off exercise at the start of a project.
“Where there are material changes to cost, scope or timing, those changes can have insurance consequences. The introduction of the levy gives brokers another reason to revisit the assumptions behind a development and make sure the risk being presented to insurers remains accurate.
“For SME developers, a relatively small gap in declared values can become significant if a claim occurs. Keeping those figures under review is one of the simplest ways to reduce the risk of underinsurance.”
The levy will apply to certain new residential developments requiring building control approval. Developments forming part of schemes with 10 or more new dwellings will generally fall within scope, subject to exemptions. Purpose built student accommodation can also be caught where the wider development comprises 30 or more new bedspaces.
Rates will vary according to the local authority area and the amount of chargeable floorspace, with different rates applying to previously developed land.
“Situations like this underline the value of broker advice. Keeping brokers and insurers informed as project costs change can help make sure cover continues to reflect the risk,” concluded O’Neill.
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