Kerry London News

Construction Professional Indemnity Insurance – protection for the year ahead

Wednesday 7th February
Construction Professional Indemnity Insurance – protection for the year ahead

The construction industry has gone through a prolonged period of unprecedented changes. Devastating events such as the Grenfell fire, the pandemic and, most recently, conflicts in Europe and the Middle East have triggered a lot of change. The industry has evolved and shown incredible resilience in managing new legislation, regulations, long-term economic uncertainty and severely disrupted supply chains. As we enter another new year, Kerry London discussed how insurance can play a vital role in offering financial protection during times of uncertainty.

The Construction Professional Indemnity (PI) market has moved in a positive direction over the last year. The market’s cyclical nature means cover availability and affordability can change every couple of years. The PI market started to harden in 2018, triggered by events such as the cladding crisis that followed the Grenfell fire. Since then, rates, available cover, and insurer appetite for new business have improved dramatically. Some insurers offer rating decreases to those with solid risk management plans, healthy claims histories and strategies for long-term sustainable growth.

Cladding and fire safety exclusions

One notable change is the availability of cladding and fire safety cover for most firms. The standard International Underwriting Association (IUA) cladding and fire safety clauses are here to stay, but the days of complete exclusions appear to be over. Most insurance is forward-looking (new projects only) and offered individually, but this important development protects those looking to take on new projects.

Insurers no longer ask contractors for long-term cladding and fire safety questionnaires but providing evidence of risk management is an understandably important part of the application process. It’s also important to be aware that cladding cover is restricted to aggregate limits, increased excesses and consequential loss exclusions are applied.

Implementing the Building Safety Act

This year will see the full implementation of the rules under The Building Safety Act (BSA). There’s a lot of uncertainty regarding how this will affect the construction industry, and many commentators agree that it has increased the potential for civil claims.

The Building Safety Regulator (the BSR is part of the Health & Safety Executive) is the new building control authority for all higher-risk buildings (HRBs) in England. The BSR’s three-year strategic plan (2023 – 2026) aims to raise and deliver consistent building standards, regulating planning, design, and construction of new high-rise buildings (HRBs). The BSR has several enforcement methods for companies and individuals and stated its objective to implement a more stringent regulatory regime for HRBs in England.

Professional indemnity insurance preparation

Kerry London’s Professional Indemnity team guides contractors through the process of organising the most competitive cover for their needs. They recommend the following:

  • Early contact with a construction professional indemnity broking specialist is essential, and ensure all information is shared at least eight weeks before you need cover or six weeks before renewal.
  • Tripartite meetings with your broker and insurer help iron out any issues, address questions directly, and help identify the most competitive insurance solution.
  • Provide detailed information for your quote or renewal, including subcontractor and supply chain information. Do they have their own professional indemnity insurance, and if so, do they have cover limits?

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Kerry London is authorised and regulated by the Financial Conduct Authority. The company is a leading UK independent and Lloyd’s accredited broker, which means that we work with a wide range of niche and major insurers.

This note is not intended to give legal or financial advice, and, accordingly, it should not be relied upon for such or regarded as a comprehensive statement of the law and/or market practice in this area. In preparing this note, we have relied on information sourced from third parties, and we make no claims as to the completeness or accuracy of the information contained herein. You should not act upon information in this bulletin nor determine not to act without first seeking specific legal and/or specialist advice. We and our officers, employees or agents shall not be responsible for any loss whatsoever arising from the recipient’s reliance upon any information we provide herein and exclude liability for the content to the fullest extent permitted by law.

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