Construction cover cost cutting exposes sector to great risk
- Date: 02/04/2009
While problems in the economy have left many commercial and residential property developers in difficulty, Simon Main, MD of construction defects insurance specialist BLP, has identified a trend in cover cost cutting. Unless checked, he sees the trend as storing up problems for the future and a further threat to the stability of the sector.
“Not having the right kind of cover is a ticking bomb,” Main says. “The increasing pressure to cut costs has been changing the dynamic in the sector. This can mean a flight from quality and protection. Now is not the time for companies in this sector to take on further risk. It is a trend that will leave companies increasingly exposed if they assume more and more risk as they look to shed or cut back on cover.
”We are all trying to find ways of kick-starting projects, large or small, and finance can be hard to come by. But it must be a condition of receiving that funding that developers have an eye to the legacy of their developments. Everyone involved should be concerned with ensuring the end consumer isn’t let down on quality issues. That means proper risk management and proper insurance with sufficient depth and breadth of cover – especially defects cover,” Main continues.
Main urges commercial and residential developers to take action to avoid storing up problems which will come back to haunt them. He believes the right kind of cover:
1. Makes commercial and retail developments more desirable to end customers.
2. Protects builders’ and developers’ investment and reduce their exposure to risk so they can complete and sell their developments on time.
3. Guarantees true end-customer focus – where all stakeholders are protected, as they should be.
“It's a tough time for construction but the shoot-from-the-hip tactic of cost cutting on cover will come back to haunt those who try this route. Developers, landlords and future tenants just don't know what's in store for them – and this is going to be a major problem,” he says.
“As end-consumers increasingly wise up, as a tough economy forces them to, they will be looking much more closely at the guarantees – insurance and technical - for the new office blocks, retail units and homes they’ll be viewing. Developers who adhere to quality right down the line from their bricks through to their warranties will be in a much stronger position in the recession than those who don’t.”
Main concludes: “Major construction projects are not being abandoned – they have to be finished, sold and rented. But right now, those in the sector who ignore quality insurance cover do so at their peril as there’ll be no safety blanket when problems, as they inevitably do, crop up.”
About BLP – the construction defects insurance specialist.
BLP is the standard setter in the UK market place for new building and refurbishment defects insurance and technical expertise for residential, commercial and mixed use schemes.
Their insurance cover protects commercial, residential and mixed-use developments in the UK and they are the only company that carries out a quality assessment on every risk – be it residential or commercial.
Unlike other insurers, BLP arranges cover from day one with no financial restrictions and offers simple, easy to use and flexible building defects insurance. They provide the only true residential defects insurance.
In business since 1984 (trading as Building Lifeplans Ltd since 1999) now known
under its trading name of BLP since 1999, the company is headquartered in the City
of London. BLP is a subsidiary of Thomas Miller. BLP is regulated by the
FSA and is backed by Allianz Global Corporate & Specialty AG (UK Branch), with an
insurer financial strength rating of AA.
Known for its quality products, professionalism and technical expertise, BLP has established strong and long-standing relationships with a wide range of customers which include: architects, designers, contractors, builders, housing associations, landlords, tenants, property developers, property consultants, property lawyers, investment bankers and pension fund managers.
Their customer list includes the following organisations: Scottish Widows Investment Partnership, Catalyst Housing Group, Newlon Housing Trust, McCabe Builders (UK) Ltd, Highgrange Homes Ltd, JLP Homes, Oakdene Homes plc and The Elegant Group Ltd.
For further information please call us on 020 7204 2424.