Construction industry taking urgent steps to protect against building failure
- Date: 30/06/2014
Guaranteeing a secure income stream in the event of business disruption is the key factor for commercial insurance brokers when thinking about protecting their client’s construction assets.
The recent survey* carried out by BLP Insurance, the specialist insurance provider, revealed that a third of commercial insurance brokers are concerned about income stream protection for tenants in a development in the event of a building defect arising. Over a quarter of brokers consider the ability to offset potential losses, which could arise as a result of having to put right any failings, as the most important consideration for clients.
As developers become more concerned about protecting the long-term sustainability of their assets, there is an increased awareness of latent defects insurance in the construction industry when compared to five years ago. Two thirds of commercial brokers are fully aware of the product, and over half of respondents see its value in protecting homes, offices and mixed use developments against potential failure and subsequent repair of any structural defects, component failure, mechanical and electrical faults.
Despite the growing awareness of latent defects insurance, nearly 20% of commercial brokers surveyed still have no knowledge of the product. Traditional development warranty cover does not have sufficient limits to cover the full cost of development for a growing number of schemes, especially high end residential developments. This leaves properties completely exposed and developers with the risk of costly bills should a building defect arise.
Brian Kilroy, Business Development at BLP Insurance, says: “Failure to protect an asset could result in considerable costs later along the line. Due to the restrictions for developers when claiming on a traditional warranty, we have seen an increasing trend of banks, investors and funders who now insist on latent defects insurance on all schemes before considering a partnership or any type of development involvement. In today’s market, they just can’t afford to leave their investment exposed.
“We are seeing an increasing demand for our commercial latent defects insurance product as the industry wakes up to the benefits of this type of comprehensive cover, both as a way of protecting the investment against the consequence of building failure as well as a way of making their offer more attractive to potential commercial tenants.”
As awareness of latent defects insurance continues to increase, BLP Insurance has witnessed a 575% increase in commercial schemes insured when compared to the same time in 2013.
* The survey was carried out amongst 46 commercial brokers across the UK.
For further information please contact:
Roddi Vaughan-Thomas, Lianne Robinson, Cara Penkethman and Alexander Burley
Telephone: 020 7726 6111