ABI signposts second successful year for Fire Safety Reinsurance Facility

Launched on 1 April 2024, the Fire Safety Reinsurance Facility is an industry initiative designed to improve capacity in the multi-occupancy buildings insurance market. By improving capacity, many leaseholders in England, Wales and Northern Ireland (as well as flat owners in Scotland) who live in high-risk buildings with combustible cladding and fire safety issues can now access insurance coverage where they previously could not have done so or are able to do so at better terms.

Last year, the Fire Safety Reinsurance Facility was expanded so that participating firms could cover losses up to £75 million rather than £50 million. In its first year, 89.5% of risks within the Fire Safety Reinsurance Facility were covered within the £50 million limit, but the remaining 10.5% would have needed to secure additional insurance to be fully covered.

However, since the expansion, 94% of risks were able to secure 100% of coverage through the Fire Safety Reinsurance Facility, thereby avoiding the need to secure more cover at an additional cost.

Time-limited intervention

The Fire Safety Reinsurance Facility is intended to be a time-limited intervention to provide insurance cover for buildings that need remediation. As progress is made on the Government’s Remediation Acceleration Plan, and across comparable programmes in Scotland, Wales and Northern Ireland, buildings should be considered safer and pose less of a fire-risk.

The intention is that, once remediation work is complete, the Fire Safety Reinsurance Facility will no longer be needed as buildings can find appropriate insurance through the wider insurance market and at terms that reflect their risk.

That said, the industry and fire safety experts have consistently stressed the only long-term solution to support leaseholders facing higher insurance premiums is remediation to a standard that protects both life and property.

Data collection changes

Over the past year, the ABI has changed how it collects data, accounting for differences in reporting approaches by firms as well as adjustments to policies within their terms (for example, property revaluations). In doing so, the figures stated in July last year have been updated. They show that 703 risks were supported through the Fire Safety Reinsurance Facility in its first year, with a total sum insured of £17.5 billion.

Chris Bose, the ABI’s director of general insurance policy, stated: “It’s encouraging to see that the Fire Safety Reinsurance Facility continues to work as intended by improving access to insurance for buildings with fire safety risks.”

Bose continued: “We recognise the significant uncertainty, stress and financial pressures many leaseholders have been living with. The uptake we’ve seen over the past year shows that insurers have been able to offer cover where capacity would otherwise be limited.”

In conclusion, Bose noted: “No insurance initiative can fix the underlying problem. The Fire Safety Reinsurance Facility is a temporary measure. Remediation to a standard that protects both life and property remains the only long-term solution for leaseholders.”

*Further information is available online at www.abi.org.uk