Is All A-Rated Capacity the Same in Latent Defects Insurance?

In recent weeks, more warranty providers have begun promoting that they now offer A-rated latent defect insurance capacity, and that’s a welcome shift.

It’s something J3 has been advocating for since the beginning, because long-tail risk requires long-term financial strength. So yes – the direction of travel is positive.

But while an increase in A-rated options signals progress, there is an assumption starting to form that all A-rated providers are equal. And for lenders, developers and institutional asset owners who rely on this cover to protect asset value, funding security and operational performance long after completion, that assumption can be risky.

An A-rating is a valuable benchmark, but it doesn’t tell the full story. It confirms financial strength, not how the insurer operates day to day, how decisions are made, or how the policy will perform over the life of the development.

There’s also a growing assumption that an A-rating means long-term commitment to the latent defects sector. In reality, some insurers have a clearly defined strategy and longstanding presence in this class, while others are newer to the space and may still be establishing appetite, approach and long-term positioning. Market conditions, claims experience and strategic priorities can all influence how capacity is deployed over time.

On paper, providers may appear similar. In practice, approaches can differ and that distinction isn’t visible in the rating.

1.Capacity vs Capability

An important difference lies in how the policy is administered. The insurer provides the capital, but the provider is responsible for the day-to-day reality: underwriting decisions, technical oversight during construction, communication throughout the project lifecycle and the handling of claims.

Some operate with established governance frameworks and experienced teams, allowing for consistent, predictable handling. Others may use a more distributed decision process, which may naturally lead to variations in turnaround times. For developers managing programme timelines or lenders managing exposure, that operational difference can influence certainty.

The rating shows who pays – not how the process works.

2. Delegated Authority and the impact on certainty

Delegated authority also plays a key role. Where authority levels are well-defined and robust, underwriting decisions, project amendments and certification can move at the pace a live development requires. Where authority is limited, turnaround times can depend on external approvals, which may affect project flow.

In a build environment, delays are not theoretical, they can have real commercial implications.

3. Claims Handling: The Real Test

The value of a latent defects policy becomes clear when a defect arises. This is where behaviours and process matter. Some insurers approach claims collaboratively and with the intention of resolving issues efficiently, while others adopt a more formal assessment style. Both are valid models — but they can lead to very different experiences.

Same rating, different reality.

4. Technical Oversight and Build Quality

Inspection models also vary. Some operate with staged, risk-based technical assessments led by experienced surveyors aligned to construction methodologies. Others take a lighter, more compliance-led approach. Stronger oversight during build generally results in fewer issues later and more confidence for stakeholders.

Why This Matters to Lenders, Developers and Asset Owners

Latent defects insurance isn’t a formality or a tick-box exercise. It underpins funding, forward-sale strategies and long-term asset performance. For sectors such as build-to-rent, PBSA, modular construction and institutional portfolios, the continuity and reliability of the insurer can be just as important as the rating itself.

So the question shouldn’t stop at:

“Is the insurer A-rated?”

A more useful question is:

“Is this insurer experienced, committed to the sector, and operationally capable — and will they still be here, behaving consistently, when the policy is relied on?”

J3 Director Jack Bristow explains it succinctly: “The growth in A-rated capacity is a positive step for the latent defects market -but an A-rating doesn’t automatically mean equal. The rating confirms financial strength, not long-term commitment, underwriting consistency, delivery experience or how claims will be handled. The most reliable warranties pair A-rated security with established market presence, strong delegated authority, experienced technical oversight and a fair approach to claims. Real confidence comes not just from the rating, but from the foundational behaviours and capability to actually deliver – That is the business we are in.”