New model insurance clause to clear PII fire safety logjam

Aaron Morby 3 months ago
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Cladding projects on high-rise residential buildings have been boosted by the publication of a new model insurance clause covering fire safety risks.

The wording has been developed by the International Underwriting Association (IUA) and Government for use in work being completed under the government’s £4.5bn Building Safety Fund.

The model clause is freely available for use by underwriters looking to provide professional indemnity insurance for building cladding remediation work.

Levelling up Secretary, Greg Clarke said he hoped the move would speed up the removal of unsafe cladding, encourage a greater safety culture within the construction industry and provide insurers with increased confidence in risk management processes employed by contractors.

He said: “Our priority is making sure people’s homes are safe and that safety standards are high.

“Alongside our tough new regulatory regime, this new clause that has been developed with my department to help us do just that.

“We welcome the work of the IUA and the underwriters who are taking a proportionate approach to fire safety cover and I thank insurers in advance for using it.”

Chris Jones, IUA Director of Legal and Market Services, said: “Our new model clause sets out a number of key risk management processes that will ensure work being carried out is conducted within recognised industry standards.

“This will help improve accountability for safety measures and foster an investment in quality construction.”

He added: “The market for construction professional indemnity insurance has been difficult in recent years, reflecting concerns about the potential for historic liabilities to develop into future claims following the Grenfell Tower tragedy.

“Each new risk must continue to be assessed on a risk-by-risk basis, of course, but the clause should provide underwriters with greater confidence to offer effective insurance solutions for future work.”

A survey of IUA members in September last year revealed a cautious willingness amongst IUA members to underwrite fire safety risks on new projects to remove defective cladding from high rises.

Around two-thirds of respondents stated they would provide a limited form of cover, but only 4% were happy to offer unrestricted protection.

The poll was carried out by the IUA’s Construction Professional Lines Working Group which was established in 2019 to encourage greater engagement between insurers, government, regulators and construction firms.

Copies of the IUA Building Safety Fund Cladding and Fire Safety Limited Exclusion and Aggregation Clause are freely available to download – see last entry in this link.

 

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