Preparing for the next Insurance storm 

Recently, Flood Re has been widely reported as the proposed industry solution for insuring the most at risk properties; however, because of the leasehold system, most blocks will be excluded from the proposed Flood Re scheme for some years to come.

The problem for most blocks is that they have leases that don’t cater for the changing face of insurance. Most are deficient in respect of considering excesses and uninsured events, with many leases also being vague about which perils need to be insured for. And, if these leases are interpreted literally then freeholders could opt to omit a peril in preference to carrying a large excess against that peril because it is unrecoverable under the lease.

There are solutions to these issues but some will take time. Clearly the industry needs to lobby support for the inclusion of blocks of flats in the Flood Re scheme; but in the meantime, it is back to reading those leases and acting on them appropriately.

However, let us not forget the basics. Good risk management of blocks will help to keep premiums down and this includes diligent inspections to prevent slips and trips, maintaining vegetation to prevent subsidence as well as maintenance of roofs to prevent storm claims. If, however, you are thinking that this is the insurance companies’ problem then it may be worth thinking again.

Insurers have no obligation to continue to lose money in the block market and this isn’t about them being greedy. In a less competitive insurance market insurers will be able to pick and choose the risks they want to insure with direct consequences on badly maintained blocks.

And, if there is a positive side, it has to be that historically, the insurance market at times of less competition in any segment will drive towards lower commissions. Now that in itself has to be a positive long term effect of what are otherwise gloomy times.