Although there are environmental merits of retrofitting a building versus demolishing one, there are some important considerations when sourcing building warranties for conversion schemes.
Refurbishments and fit-out works on existing buildings are a popular choice for developers and property professionals – Especially in areas of regeneration and in light of the now changing face of the traditional high street.
Leading insurance providers in the building warranty market perceive refurbishment and conversion to carry a greater risk than new-build schemes. As a result, they have less appetite to provide insurance for them.
Moreover, with a hardening insurance market and limited level of available capacity across the board, underwriters have become more selective with the risks that they offer terms on.
Some of the key considerations for insurers include:
- Insured values: If the existing structure value is equal to or in excess of the value of the new works, insurers often decline to offer cover for the project. The insurer wants to be insuring new works, not insuring an old building that they have little to know insight on its structural integrity.
- Underwriter Appetite: If an underwriter has stipulated that their binder doesn’t allow for conversion projects (no matter how big, important or impressive the developer is), it’s a wasted conversation. Knowing the market is vital.
- Inherent Risk: Unlike new build projects wherein there is a gradual increase in risk throughout, for conversion/refurbishments, there is an established but often unknown quantity of risk in the form of the existing structure. Understanding a buildings history, previous use and having a structural engineers report to hand, will see you well placed to alleviate some of an underwriter’s immediate concerns.
Merits of working with Conversion building warranty specialists:
Typically, we will talk about being a whole of market broker, having greater access to markets and deeper relationships. However, it’s important to caveat that by saying that we don’t take every risk to every insurer. We take the right projects, to the right insurers. The precursor to doing that well, is having all of the key relationships and knowing which underwriters want to write which type of cases.
This saves developers vast amounts of time, not to mention results in sets of terms that are sensible because the underwriter is looking at a risk within their appetite. Conversions, as outlined above, come with their own set of rules when it comes to underwriting so having an advisor on hand who knows the rules and rule makers, enables a developer to keep building knowing the right insurance is in place.