The changes we have seen in the 10 year structural warranty market have been quite significant.
While some warranty providers exited the market, leaving developers with a short panel of insurers to choose from, others had to hit ‘pause’ on writing new business until they could arrange new capacity facilities.
There has been a broad consensus that the construction insurance market has hardened significantly, and that statement couldn’t be more true when arranging new home warranties.
That threat has become our opportunity, and we have been delighted to help a number of experienced property professionals navigate the latent defects arena.
If you’re not quite ready to hit the enquiry button just yet, we’ve created a ‘must know’ list for developers when they come to arranging their 10 year structural warranty. After all, it is the most expensive single term policy arranged for each new project:
Limit of indemnity
As insurers find it difficult to secure new capacity, we’ve seen a common trend in the market, where many providers limit their levels of indemnity per structure to £25m. This has left many SME developers vastly underinsured.
Even on smaller projects, developers should always confirm in writing that the reinstatement cost and the limit of indemnity on the policy are complementary of one another. It’s alarming how often we see an “alternative quote” that is priced attractively but often leaves the developer grossly underinsured.
As an FCA-regulated advisory, it is our duty to make sure property developers partner with an insurer that works on a full construction value basis.
With the period of cover for a structural warranty being ten years, it’s crucial when procuring this piece of insurance to make sure the insurers’ underwriter has a financial rating from one of the UK’s ratings agencies. While nobody can completely guarantee the solvency of any entity, these ratings evaluate and assess a company’s creditworthiness and offer comfort to their network that they are a reputable business.
By way of an example, many developers will recall in 2018 when CRL’s un-rated underwriter, Alpha insurance, was declared bankrupt. This was both a time-consuming and costly exercise for developers who had placed their faith in CRL and then had to seek alternative cover.
At J3 Advisory, we will only work with those 10 year structural warranty providers that have A-rated capacity. While there is no requirement for an insurer to be rated, it provides credibility to their operations. We believe it gives our clients the best opportunity to protect themselves from situations akin to the CRL/Alpha one in the future.
The ultimate objective of any insurance is to offer peace of mind to the policyholder. Specifically, with latent-defects insurance, you want to have confidence that the ultimate underwriter will be around for the lifetime of the policy to fulfill their obligations in the event of a claim.
Access to the lending market – Fully compliant with the UK Finance Lenders Handbook
When selecting which 10 year structural warranty provider to partner with, the insurers’ access to the lending market should be a key consideration. Insurers who don’t have A-rated carriers often have more restrictive lender acceptance lists that can become detrimental to sales. When working with the lesser-known insurers, there are often further restrictions around the number of units that a lender will accept from providers (for example: “Bank A will accept Insurer B but only on projects of less than ten units”)
Competent and compliant technical services
Developers should be mindful of the insurers’ technical process and requirements on-site. While there are insurers in the market whose requirement is that you build in line with building regulation standards, some providers also have technical handbooks that go above and beyond. We work with our clients to understand the project at hand and partner them with an insurer who will best complement their development.
Many questions are often asked of a developers’ experience when undertaking a new scheme, such as:
- Have they completed projects of a similar scale previously
- Details of their recent portfolio of projects
- Details of the professional on-site team (main contractor/sub-contractors)
However, when exploring the market, developers should rightly ask similar questions of their prospective insurers:
- What are the insurers’ appetite and experience of similar sized schemes
- Does the insurer have references available for comparable developers/developments
At the lower end of the latent defects market, it is all-to easy to find an attractive price from a provider that lacks the experience, level of indemnity, and capacity you need for your ‘big’ project.
Like those that went through the CRL/Alpha situation: The bitterness of poor quality remains long after the sweetness of a low price is forgotten.
10 Year Structural Warranty with J3 Advisory
By truly understanding our clients’ goals, we can provide objective advice, finding them the most suitable cover for their business. We have access to all A-rated 10 year structural warranty providers across the market and deliver a comprehensive market comparison enabling developers to make decisions confidently and swiftly.
While being results-driven and providing a fresh approach, we also offer the benefits of continuity. We frequently take care of the insurance on multiple schemes with the same client, becoming an extension of their businesses.
Clients benefit from our detailed knowledge of their projects, their objectives, and a deepening relationship with their people. This evokes confidence not only from our clients but also the insurers and underwriters we place business with.
If you have a project you wish to discuss, call us on +44 203 096 0718 or fill in our enquiry form online.