Matt Jones and James Burgoyne of Lockton reflect on our annual fire safety update exploring the impact of changing building regulations on the design and safety of buildings.

As we come to a close on 2023, many will be relieved to hear that there have been considerable positive movements within the Professional Indemnity Insurance (PII) market over the last 6 months, and a somewhat brighter horizon peaking in the distance. 

 

We have observed some competition returning, which has led to some healthy reductions in rating from underwriters and, perhaps more importantly, wider coverage terms and less restrictive and/or exclusionary language. 

 

One key development we have seen is the availability of coverage in respect of fire safety and cladding claims. It’s important to note the landscape is ever changing and as we move into the new year we anticipate further positive movement for our clients. 

Changes initiated by the Building Safety Act 2022 (BSA), and in particular around the new Principal Designer role, are creating new uncertainties. These are difficult to address at the present time as the final position under the BSA has not yet been established. Secondary legislation is awaited which will further clarify the position. 

 

There have been concerns regarding the PII market’s reaction to additional exposure created by the new Principal Designer role, and whether PII cover may be restricted or excluded in relation to BSA Principal Designer exposure.

 

The PII market is still assessing the risks represented by the new Principal Designer role, but in-depth consideration has questioned whether the changes really represent a radical expansion of exposure to professionals undertaking this role, given common approaches taken contractually around compliance with regulation in professionals’ appointments, and common strategies adopted by claimants in bringing a claim where a large construction project is concerned.

 

At the present time, the PII market is not restricting cover specifically in respect of the BSA Principal Designer role, and there has not been a market-wide recoil from the potential exposure but the evaluation of developments in this area is continuing. 

With competition returning to the market underwriters are seeing an increased volume of submissions and face the difficult decision of where to deploy their financial capacity. The 2 key considerations are Presentation, and Representation. 

 

Presentation – The proposal forms and questionnaires insurers require cover the information needed for an underwriter to either quote or not. These documents often don’t provide much context however or give Insurers an insight into how a practice is run, from leadership to risk management. Underwriters calculate risk, so naturally by demonstrating an aversion to risk Insurers may be inclined to quote more positively. 

 

For further information please visit our Lockton for Architects and Engineers page, or contact:

Matt Jones, Construction & Property Leader
T: +44 (0) 7714 620 899
E: matt.jones@lockton.com

James Burgoyne, Senior Vice President
T: +44 (0)117 906 5077
E: james.burgoyne@lockton.com