To increase the capacity available for multioccupancy residential leaseholders of buildings with flammable cladding, the ABI has established a reinsurance facility with reinsurance brokers McGill.
As an ABI member, we are pleased to inform you that we have access to this facility in order to provide cover for eligible risks for new and existing customers.
The key points about this arrangement are noted below:
Key points:
Eligibility
1st April 2024 inception or renewal date onwards
Multi-occupancy residential buildings up to £50m total value at risk. Larger buildings up to £150m may be considered by exception on a case-by-case basis
Buildings categorised by our Business Resilience Manager as either Category 4 (Combustible) or Category 5 (Highly Combustible) on the RISC Authority scale (part of the Fire Protection Association)
Where a building is eligible for government financial support under the Cladding Safety Scheme (CSF), it must be actively pursuing support and must have or be developing a remediation plan. Buildings that are ineligible for CSF are still eligible for terms from AXA and the McGill scheme
Buildings written 100% by us. Co-insured business may be considered by exception on a case-by-case basis
The building must be predominantly residential occupancy, some commercial parts are acceptable, but it must form less than 50% of the exposure
Purpose built student accommodation and aparthotel type business is excluded
UK only exposures.
What will happen?
While we’ve stood by existing customers impacted by cladding issues, in many instances it’s been necessary to introduce lower first loss limits to manage our exposure to the heightened level of fire risk.
For eligible business, we will underwrite the risk 100% (up to £50m), with reinsurance support organised by the ABI/McGill facility. For business up to £50m, the first loss limits and the need to buy relatively expensive excess layers above the AXA limit, will disappear. Further, we will not charge more for the additional cover, the charge for the previous lower limit will cover the whole placement. We anticipate the savings on larger eligible exposures to be significant.
For very large business up to £150m total insured value, we will use the ABI/McGill facility to provide the first £50m of capacity. Any capacity we can provide above this level will be subject to us being able to secure additional reinsurance, separate to the facility, and priced based on the cost of this capacity to us.
Similarly, to most other large insurers, we have not been actively quoting new business in this segment over the last few years. However, the reduced net exposure due to the ABI/McGill facility means that we can once again open to new business. Please approach us with new enquiries for buildings meeting the eligibility criteria and we will be pleased to find a solution for you.
Portfolios
For buildings that form part of a portfolio, it will be necessary to ring-fence the impacted building(s) and place them on a separate policy, so they can easily be identified as part of the facility. In many cases this has already been done in recent years. For new business that is part of a portfolio, it is important that you place the whole portfolio with us, rather than only the combustible/highly combustible building(s).
Commission
Due to the higher risk reflective premiums associated with combustible/highly combustible buildings, three-years ago with decided to cap the commission payable at 20%. Thank you for your support during this period and it is acknowledged that many of you went further and decided to work net on these buildings.
As part of this change, we will also be reducing our maximum commission for these building to 15%. Our underwriters will ensure that any final gross premium agreed with you is reduced to account for this reduction, so that the saving is passed on to the leaseholders.
Summary and next steps
We envisage the increased capacity on larger buildings and the option to place new business with us, will improve conditions for leaseholders impacted by these issues considerably. We have internally identified buildings likely to be impacted by these changes, and our underwriters will be in contact in good time prior to renewal to discuss terms with you. Unfortunately, it is not possible to move business to this facility mid-term.
Alternatively, if you would like to be pro-active on renewals, or you would like to discuss new business with us, please reach-out to your usual AXA contact.
None of these changes alter our commitment to reducing the premium paid by leaseholders immediately following building remediation to an agreed acceptable standard.
We look forward to working with you to find improved solutions for our mutual customers.
FAQs
Will you offer quotations for New Business customers under this facility?
Yes, we will be happy to offer a quote for any new customers where the building meets the scope of the facility, for new business that is part of a portfolio, it is important that you place the whole portfolio with us, rather than only the combustible/highly combustible building(s).
What date does the facility start from?
1st April 2024 inception date or renewal date.
For existing business: our underwriters will be in contact in good time prior to the renewal date to discuss the terms with you.
For New business, please approach your usual AXA contact with enquiries for buildings meeting the eligibility criteria.
Will you accept buildings that have part commercial occupancy?
The building must be predominantly residential occupancy, some commercial parts are acceptable, but it must form less than 50% of the exposure.
Does the facility cover aparthotels and student accommodation?
No, these types of buildings are excluded from this facility.
What category of construction is eligible for the facility?
Failed fire test buildings categorised by our Business Resilience Manager as either Category 4 (Combustible) or Category 5 (Highly Combustible) on the RISC Authority scale (part of the Fire Protection Association).
What is the is the maximum total value at risk you will consider under the facility?
Multi-occupancy residential buildings up to £50m total value at risk. Larger buildings up to £150m may be considered by exception on a case-by-case basis.
Does the building have to have a remediation plan in place?
Where a building is eligible for government financial support under the Cladding Safety Scheme (CSF), it must be actively pursuing support and must have or be developing a remediation plan. Smaller buildings that are ineligible may still be accepted.
Are cases that are currently co-insured with several insurers eligible under the facility?
Buildings must be written 100% by AXA. Co-insured business may be considered by exception on a case-by-case basis, but generally it isn’t felt the additional capacity provided by the facility will provide a saving.
Are vacant risks eligible for the facility?
Yes, provided that no more than 50% of the residential flats forming any building become unoccupied for 30 consecutive days or more.
What is the position with buildings in the course of remediation?
These can be transferred onto the facility, provided that we have full details and scope of the works involved prior to cover attaching. Where possible, we will support the CAR placement associated with the remediation of these buildings.
What is the maximum commission rate you will offer?
Due to the higher risk reflective premiums associated with combustible/highly combustible buildings, the maximum commission we'll offer for these buildings is 15%. Where current commission levels are higher than 15%, our underwriters will ensure that any final gross premium agreed with you is reduced to account for this reduction, so that the saving is passed on to the leaseholders.
What about Liability covers?
Cover for Property Owners Liability and Employers liability are out of scope for this facility and will continue to be covered under a separate policy by AXA.
Who will handle claims?
There will be no changes to our standard claims handling process.
What about buildings insured as part of a larger portfolio?
For buildings that form part of a portfolio, it will be necessary to ring-fence the impacted building(s) and place them on a separate policy, so they can easily be identified as part of the facility.
What is the position with buildings outside the UK?
The facility is only available for buildings in the UK.
