UK insurers review premiums on high-rises after Grenfell fire

Protector Forsikring ASA

23/10/2017 06:00

* Insurers consider excluding combustible cladding-broker 
    * Taking down cladding can cut premiums 
    * Weak fire safety could lead to higher premiums 
    * Sprinklers another concern 
 
    By Carolyn Cohn 
    LONDON, Oct 23 (Reuters) - Insurers are considering raising 
premiums for tall buildings in Britain with flammable cladding 
panels and no sprinklers or even excluding related risks 
following the Grenfell fire in London earlier this year. 
    Inquiries into the tragedy, which killed up to 80 people in 
the 24-storey social housing block in June, are expected to take 
several years, but property insurers are not waiting for that, 
or for subsequent changes to the law.  urn:newsml:reuters.com:*:nL8N1MF1GA 
    While they cannot change existing insurance cover, renewals, 
many of which fall due in Jan or April 2018, will give them a 
chance to adjust prices or policy wordings to mitigate their 
risks. 
    The Grenfell tower was coated with combustible panels and 
had no sprinklers, two factors which experts have said helped 
the fire to spread. The building's Norwegian insurer Protector 
 PROTCT.OL  estimated gross property and liability insurance 
claims of 50 million pounds ($65.87 million).  urn:newsml:reuters.com:*:nL8N1JY136 
    The type of cladding used on Grenfell Tower and many other 
buildings has failed government safety tests following the fire 
and some insurers are now reluctant to cover them, industry 
experts say, particularly for buildings under construction. 
 urn:newsml:reuters.com:*:nL8N1JP35L 
    "We have seen some draft exclusions, or partial exclusions, 
for claims in respect of cladding used on tall buildings where 
it does not comply with building regulations," Andrew Rose, 
claims specialist at insurance broker Miller, told a recent 
industry briefing. 
    Rose added this was "something which certain insurers have 
put forward in relation to their renewals for construction 
operations", without specifying the insurers.  
    Insurers who spoke to Reuters, however, said they were not 
planning to exclude cladding. 
    "We should not be relying on exclusions, we should be 
looking at the property, giving advice, making recommendations," 
David Williams, technical director at AXA  AXAF.PA  said. 
              
    REGULATIONS TO CHANGE 
    AXA is one of the biggest insurers of large properties in 
Britain. Others include FM Global, Zurich  ZURN.S , Allianz 
 ALVG.DE  and Aviva  AV.L . 
    Williams said AXA had upgraded its administration so that 
information on the number of tall buildings it insures or the 
type of cladding they are using is more easily available, 
helping to identify risks quickly. 
    Zurich Municipal has recommended its clients review their 
fire risk assessments and said its "strong recommendation" was 
the use of fire resistant or non-combustible insulation. 
    "We will not be withdrawing any existing cover for our 
customers," said Allison Whittington, head of housing at Zurich 
Municipal, adding that the firm would work with customers "to 
help them manage these exposures".   
    Building regulations do not set proscribed standards, 
lawyers say, leading to greater uncertainty over how to 
implement the regulations following the fire. 
    "Interpretation of the building regulations will change," 
Catherine Gelder, partner at law firm Berwin Leighton Paisner, 
told the same briefing. 
    The Association of British Insurers (ABI), which warned of 
the dangers of cladding made from combustible material in May, a 
month before the Grenfell fire, called last week for an 
immediate end to its use on new and refurbished buildings. 
    Insurers have also commissioned the Fire Protection 
Association, Britain's national fire safety organisation, to 
examine issues including cladding and sprinklers in residential 
buildings. 
    Excluding such cladding from policies was one option for 
insurers, along with other options such as raising premiums, 
John Ludlow, chief executive of UK insurance buyers' group 
Airmic said.  
    "There are different ways the insurers will deal with 
cladding - all are justified," he said. "If you have a property 
you need to make sure you are responsible - you need to deal 
with it." 
     
    PREMIUM SHIFT 
    Insurers previously looked at cladding in the context of 
overall fire safety, so the risks of combustible cladding panels 
could be mitigated by other positive factors such as 
well-fitting fire doors and ample fire escapes. 
    Insurers and their clients will now be looking more closely 
at cladding specifically, said Peter Wallace, construction 
underwriter at Castel Underwriting Agencies. 
    "We will be drilling down, checking, is this OK?"  
    Insurers could ask landlords to take down inappropriate 
cladding at their own expense to improve the safety of their 
buildings, a move which would cut premiums. 
    "It definitely affects pricing - it can be cost-effective," 
Williams at AXA said. 
    In contrast, if insurers were unhappy with the level of 
information they received from clients or the efforts they were 
making to improve safety, prices could rise, said Jason Cash, 
divisional director at insurance broker Howden. 
    "Comments which insurers make will probably be listened to 
in more detail now than they were before," he said.     
    Sprinklers are also a priority for insurers, and installing 
them, even into older buildings, can cut premiums. 
    Chris Johnson, executive vice president at specialist 
property insurer FM Global, said the cost of fitting sprinklers 
was "the same as the cost of a well-fitted carpet and underlay, 
which provides protection and support". 
($1 = 0.7591 pounds) 
 
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GRAPHIC-Grenfell cladding     http://tmsnrt.rs/2t97Ugs 
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 (Additional reporting by Esha Vaish; editing by Philippa 
Fletcher) 
 ((carolyn.cohn@thomsonreuters.com; 44 207 542 6320; Reuters 
Messaging: carolyn.cohn.thomsonreuters.com@reuters.net)) 
 
Keywords: BRITAIN FIRE/INSURANCE