Government-backed PII scheme for EWS-1 assessors to be delivered by MGAM and SCOR
04 July 2022
A NEW Government-backed professional indemnity insurance (PII) scheme for EWS-1 assessors will be delivered by MGAM (itself an Acrisure Partner) and SCOR in partnership with the Department for Levelling Up, Housing and Communities.
External wall fire review process forms, commonly known as EWS-1 Forms, were developed by the Royal Institution of Chartered Surveyors (RICS), UK Finance and the Building Societies Association to support the valuation process for high-rise residential buildings with cladding.
At present, there’s a significant shortage of insurance companies willing to provide professional indemnity cover to firms undertaking assessments of external wall systems in mid-rise and high-rise residential buildings. This is contributing to issues in certain segments of the property market with buyers unable to obtain the necessary certification in order to secure a mortgage.
On 10 February last year, the Department for Levelling Up, Housing and Communities announced a Government-backed PII scheme for competent fire safety professionals undertaking EWS-1 assessments to help resolve these issues. Under the new arrangements announced on Tuesday 28 June, this scheme will be delivered by MGAM through an insurance provided by SCOR UK, with Her Majesty’s Government providing reinsurance coverage to SCOR.
The scheme, which is due to be officially launched in September, will last for five years. After five years, it’s anticipated that insurers will step back into the market, which will then remove the requirement for a state-backed scheme.
Jason Anthony, CEO of MGAM, said: “When the Government approached the market for a potential solution to this issue, MGAM recognised the significant protection gap in the market and immediately responded to, and later won, the tender to administer a PI scheme for EWS-1 assessments. We have worked closely with the Department for Levelling Up, Housing and Communities and SCOR to create a solution that, over time, will enable the private markets to provide appropriate PI cover to assessors.”
Romain Launay, CEO for specialty insurance at SCOR P&C, added: “SCOR is delighted to be partnering with MGAM and the Department for Levelling Up, Housing and Communities in order to deliver insurance coverage that will ensure EWS-1 assessments can be carried out properly and in a timely fashion, thereby enabling the purchase, sale or re-mortgage of homes in what is a challenging housing market. This initiative aligns with SCOR’s raison d’être, allowing us to reduce the protection gap for the ultimate benefit of society.”
Lord Stephen Greenhalgh, the Minister of State for Building Safety and Fire, explained: “We are taking more decisive action than ever before to tackle over-cautious lending and to help identify fire risks. I’m delighted that MGAM and SCOR are joining us in these efforts.”
Lord Greenhalgh continued: “Our new indemnity scheme will give EWS-1 assessors the confidence they need to exercise their professional judgement and take a more proportionate approach towards their assessments. This is on top of nearly £700,000 in funding that we’ve delivered to train more assessors and I’m very much looking forward to seeing the real-world impact of this effort.”
Stuart Andrew, the Minister for Housing, observed: “In order to offer EWS-1 PII to competent assessors, my department must accept an unlimited contingent liability, with the Government Actuary’s Department making a best estimate of expected losses at circa £100 million. The contingent liability being claimed is unlimited because there is no theoretical cap on the size of claims that could be made. However, the risk is limited by the number of buildings, and also the number of EWS-1 assessments.”
He went on to comment: “To further mitigate this risk, we will only be offering PII cover for accredited professionals who have the requisite training, expertise and knowledge to undertake the EWS-1 assessment. In addition, completed EWS-1 assessments will be subject to an audit process to ensure they are being completed accurately and with due process being followed.”
According to Andrew, the cost of the scheme – including the expected losses – will be offset in full through premiums. “EWS-1 assessors will be required to purchase PII policies for any EWS-1 assessments they complete, with the funds gathered being accumulated and subsequently used to pay out on any insurance claims successfully made against the assessors. In this way, the scheme will operate on a fiscally neutral basis for Government.”
Commenting on this development on LinkedIn, Anthony Walker FRICS FSCSI MIFireE (director at Sircle and a member of the RICS UK and Ireland World Regional Board) noted: “The delay in reaching this position has, in my opinion, resulted in many surveyors not pursuing the RICS External Wall Systems Assessment training programme. Asking surveyors to commit well over 40 hours towards study for a qualification that was of little value without PII was seen by many as not best use of fee-earning time.”
Walker concluded: “Since the RICS training programme launched in November 2020, I am led to believe that the total number of individuals who have qualified is less than 100. Hopefully, this latest news from Government will afford practising surveyors greater levels of confidence when it comes to the value of them committing their time to the EWS-1 course.”
*An EWS-1 Form is not a Government or regulatory requirement, nor is it a building or life safety assessment. The RICS has published guidance on the criteria that should be used to determine whether a building needs an EWS-1 Form. That guidance was last updated on 28 January this year