Introduction of the Fire Safety Reinsurance Facility

The Fire Safety Reinsurance Facility (the Facility) is set to launch on 1 April 2024, marking a significant intervention in the insurance industry aimed at enhancing the availability of insurance for buildings with combustible cladding and other fire safety concerns.

Established by McGill and Partners with substantial support from the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA), the Facility seeks to expand insurance capacity for affected buildings and foster market competition.

This initiative is designed as a temporary measure, expected to operate for three to five years, to address urgent safety works needed to ensure building safety and resilience.

Mechanism and impact of the Facility

Participating insurers, including Allianz, Aviva, Axa, RSA, and Zurich, will introduce high-risk buildings awaiting remediation works into the Facility during their annual renewal process.

These companies, actively providing cover for commercial and residential buildings, aim to mitigate the fragmented insurance approach caused by the heightened risk profiles of certain buildings.

The Grenfell tragedy and subsequent reviews have underscored the necessity of this Facility by revealing the complexities surrounding insurance coverage for buildings with significant fire safety issues.

Statements from industry leaders

Steve McGill CBE, Founder & CEO of McGill and Partners, highlighted the importance of addressing fire safety risks in insuring cladded, multi-occupancy buildings: “Insuring cladded, multi-occupancy buildings that pose a fire safety risk has challenged our industry for some time.

“However, this unique facility aims to present a competitive market solution that will address this important issue and I am incredibly proud that McGill and Partners has played such a pivotal role.”

Mervyn Skeet, ABI Director of General Insurance, also stressed the role of the ABI in supporting leaseholders and improving insurance availability: “Supporting leaseholders and making insurance more widely available for higher-risk buildings with fire safety issues has been one of the ABI’s top priorities.

“I’m grateful to McGill and Partners and all the firms involved for their help in establishing this commercial intervention and hope it will encourage more insurers to enter the market and offer cover for these buildings.”

IFSJ Comment

The initiation of the Fire Safety Reinsurance Facility is a commendable step towards resolving the ongoing insurance challenges faced by buildings with fire safety concerns.

By creating a collaborative platform that involves major insurers and reinsurance companies, the industry is taking a proactive approach to not only expand insurance capacity but also encourage necessary safety remediations.

While the Facility offers a temporary solution, its underlying goal to incite broader industry and governmental action towards building safety is vital.

As the Facility begins its operations, the focus on supporting leaseholders and reducing the insurance complexities for buildings at risk signifies a positive shift towards a more secure and resilient built environment.