McGill and ABI Launch Fire Risk Reinsurance Facility
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Reinsurance support is now ready for the launch of the Fire Safety Reinsurance Facility (the Facility) starting April 1st, 2024, aiming to enhance the availability of insurance for buildings with combustible cladding and fire safety concerns.
Initiated by (re)insurance broker McGill and Partners , with backing from the The ABI (ABI) and collaboration with the @British Insurance Brokers’ Association (BIBA), the Facility aims to achieve two primary objectives: expanding insurers' capacity for covering affected buildings and fostering market competition to increase coverage options. However, it is essential to underscore that the ultimate solution lies in urgently addressing the safety issues within these buildings. The Facility is anticipated to operate for three to five years during this remediation process.
The key insurers participating in this initiative include Allianz, Aviva, Axa, RSA, and Zurich, who will initially enrol higher-risk buildings awaiting remediation into the Facility during their annual renewals. These insurers represent the top providers of insurance for both commercial and residential buildings.
The genesis of this initiative traces back to the Grenfell tragedy and the Dame Judith Hackitt Review, which highlighted significant construction and fire-risk issues in such buildings. Insurers have had to face the heightened risk of complete building loss in the event of a fire, necessitating limitations on coverage. Consequently, managing insurance for these buildings involved multiple insurers, creating a layered effect and increasing costs. The Facility aims to alleviate these challenges.
Through a reinsurance panel led by Swiss Re, the facility empowers insurers to expand their capacity and take on new business for affected buildings. Over the ensuing 12 months, insurers will evaluate additional buildings for inclusion in the facility as their insurance policies come up for renewal.
While the launch of the Facility marks a crucial milestone, it is acknowledged that no single intervention can uniformly benefit all leaseholders. Nevertheless, buildings enrolled in the Facility stand to see a significant reduction in insurance costs, particularly those currently covered by multiple insurers. The long-term aspiration is for the Facility to stimulate market competition and encourage more insurers to cover affected buildings.
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To provide immediate relief for leaseholders, government support could be pivotal. Options include financial backing for the facility to support market confidence and a reduction in Insurance Premium Tax, offering tangible cost savings.
Leaseholders are encouraged to engage with their insurance arrangers to explore the Facility further. Information regarding the Facility's operation is available for reference. However, it is important to note that insurance premiums will continue to be influenced by various risk factors and external conditions.
Steve McGill CBE, Founder & CEO of McGill and Partners, expressed pride in the role played by his firm in addressing the challenge of insuring buildings with fire safety risks. Similarly, stakeholders such as ABI, Swiss Re, and BIBA hailed the Facility's establishment as a significant stride toward supporting leaseholders and enhancing insurance availability for affected buildings.