A developer's guide to construction insurance and surety bonds

From protecting against structural defects to ensuring financial stability throughout a project's lifecycle, having the right coverage in place is essential for every development.?

This issue of the London Belgravia Property Update?dives into the critical protections offered by a structural warranty (also known as?latent defects insurance, or?LDI), vs. collateral warranty and construction all risk (CAR) insurance - exploring what each offers and why every project benefits from a tailored approach.?We also shed light on surety bonds, a flexible alternative to bank guarantees, and the peace of mind they bring to developers and contractors.?

With insights from Matt Percival , these guides?aim to help you navigate the complexities of these insurances, and key financial and legal safeguards, and the role they can play in helping your projects remain secure, compliant, and competitive.?

Both?CAR and?structural warranties are crucial for protecting construction projects, ensuring compliance with lender requirements, and safeguarding against financial losses.

These insurances work together, and are crucial for ensuring comprehensive risk management and financial security throughout the lifecycle of a project.?

But they serve different purposes and address distinct types of risks - and understanding the distinctions is essential for anyone involved in construction or property development as they offer coverage at different stages of a project and for different parties.

To learn more read our detailed guide which breaks down the financial and legal protections LDI and CAR insurance offer developers and contractors.

The table below provides a quick roundup of how CAR and LDI compare:

When overseeing a large-scale development project, ensuring the proper warranties are in place is critical for both financial security and long-term project success. ?

Recently, a discussion arose in the office regarding the type of warranty a contractor is providing for a ￡30 million prime residential scheme. When it comes to safeguarding your project, a structural warranty provides comprehensive long-term protection, unlike a collateral warranty, which depends on proving contractor negligence and may not satisfy future lenders or asset finance providers.

In this comprehensive guide, Matt breaks down the key differences between collateral and structural warranties, and the key requirements for obtaining coverage. Click here to read the full article.

To summarise, here is how these two warranty types compare:

Surety bonds provide a flexible alternative to bank guarantees, freeing up capital and improving liquidity. They?play a crucial role in developers maintaining competitiveness and meeting both contractual and regulatory requirements.?

These bonds can offer developers and investors additional protection in cases when contractors fail to meet their contractual obligations, ensuring that financial compensation is available to complete the project or cover associated losses. ?

Whether through performance bonds, section bonds, deposit release bonds, retention bonds, or advanced payment bonds, London Belgravia offers access to tailored finance solutions suitable for various stages of a construction project.?

This guide introduces the range of surety bonds available and the benefits they offer developers and contractors. Click here to discover how this could benefit your development.

London Belgravia Group is an FCA-regulated, independent specialist consultancy with a decade-long track record of providing comprehensive advice and solutions for developers, contractors and housing associations. ?

With full market access, we work with a diverse range of?insurance and finance?providers to ensure our clients receive the most suitable and competitively priced products. ?

Our construction expertise means we understand each project is unique and identify the most suitable option for the client depending on the nature of the scheme.?

With end-to-end project support, our clients benefit from administrative assistance from our Client Services team and technical support from our multi-disciplinary partners. ?

Streamline your development’s journey from planning to completion with London Belgravia Group’s independent expertise and comprehensive service. Get in touch.?

Many thanks for reading this issue of the London Belgravia Property Update.??

If you have any questions for anyone on the team, please get in touch today using our Contact page.??

Don't forget to subscribe to receive our monthly updates, and please feel free to share it with others.??

London Belgravia Brokers Ltd is an Appointed Representative of TEn Insurance Services Ltd t/a Eleven which is authorised and regulated by the Financial Conduct Authority - FRN 314593.?