Written evidence submitted by the International Underwriting Association [BSB 323]
Draft Building Safety Bill – Pre-Legislative Scrutiny
We are pleased to respond to the request for comments on the draft Building Safety Bill on behalf of our member companies providing professional indemnity insurance (PII) in the construction sector.
The International Underwriting Association of London (IUA) represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members. We currently have 64 members writing business in London. As part of our member services, we run the Professional Indemnity Forum (PIF), which constitutes around 35 insurers providing professional indemnity cover for UK and international risks across a wide range of professions. Cumulatively, they provide the majority of insurance currently available to construction professionals.
Given our focus, we will primarily limit our feedback to how the proposals may impact the provision of professional indemnity insurance, rather than technical comments on building management and safety standards.
Relatively well. It is established that, at present, regulation and construction industry oversight remains weak and this has contributed to an impasse on the availability and cost of professional indemnity insurance in certain areas of construction. This can only be resolved by an improvement in regulation of the industry and a shift in culture to better recognise the need for quality construction and safety over cost cutting. We therefore welcomed the recommendations arising from the Dame Judith Hackitt report on building regulation, which have been largely taken up in the draft Bill. We particularly support the measures to create a new building regulator, to better identify the duties of stakeholders in the construction process and to put in place more robust oversight mechanisms and an audit trail throughout the life cycle of the building.
The Bill represents a solid start towards implementing the government’s policy objectives, though we recognise that such fundamental changes will take time to bed-in and will only work effectively where sufficient resources are made available to facilitate the proposed regulatory framework. We also recognise that, whilst the primary legislation offers a framework for progress, much of the core detail to actually facilitate it will be developed by secondary legislation. Though this is to be expected given the wide and ambitious scope of the Bill and is not in itself problematic, the reliance on secondary legislation may inevitably slow the implementation process and provide less certainty for parties integrating new requirements on a piecemeal basis into their business practices. In short, the intent of the primary legislation can
be applauded for its vision and recognition that reform is badly overdue, but its’ success will be in the detailed implementation.
The Bill will effect widespread changes to regulation and hopefully help drive industry culture. However, insurers will continue to be subject to claims arising from the past activity of their insureds amid the sub-standard historic building regulations - many of the past cladding and fire safety issues that prompted the Hackitt review have yet to flow through to insurers in the form of claims – though these are expected. In the transition period, we are likely to see more claims come to fruition as insurers deal with historic matters and insureds negotiate their way through the new procedures. It also begs the question as to what other sector issues may have occurred due to the lax regulation and oversight in place. Moreover, the focus has been largely on ACM cladding, but there remain concerns on other types of cladding and use of other materials (for example cross laminated timber, high pressure laminates, timber balconies and timber construction).
Therefore, whilst the longer-term outlook is certainly more positive, the short-term for insurers remains challenging and a potential inhibitor in providing capacity to the construction sector. The government cannot overlook the legacy issue and needs to continue to engage with relevant stakeholders, including insurers, on how these potential liabilities can be better managed. The overall effectiveness of the Bill relies to an extent upon it.
It is also important that government engages with the insurance industry around the scope and level of professional liability insurance held by dutyholders. This goes hand in hand with the scope of liability that the dutyholders will face.
To an extent, yes. Whilst the Bill will provide much needed clarity for those in high-rise buildings, there also needs to be an appropriate and proportionate framework for buildings less than 18 metres in height, particularly those deemed at higher risk and/or where vulnerable persons are housed. In particular, there is a danger of creating a two-tier regulatory framework, which would be detrimental in the longer-term. On a wider point of principle, we would urge the government to be ambitious in their definition and treatment of high-risk buildings – there has been some scope creep here already and we would not want to see this watered down further.
More widely, we support the core Building Safety Regulator proposal, but there is limited detail on how the regulator will operate and what actual requirements will be proposed. We also welcome the greater flexibility around building inspectors insurance this Bill appears to bring.
Accountability needs to be clearly defined and proportionately applied. The concept of the ‘Accountable Person’ and appointed ‘Building Safety Manager’ raises obvious questions as to
who the person will actually be, whether they will be a single or multiple persons and whether there are enough suitably qualified persons to undertake the role. The latter point talks to a wider concern for insurers on the relative paucity of competent professions, particularly in respect of fire assessors / engineers, and the fear that this could be replicated under the dutyholder regime. The inter-relation between the two roles in day-to-day practice will also be key. The potential increased liabilities arising from these roles will also require careful consideration from a professional indemnity insurance perspective, reminding that insurers need also to be cognisant of potential historic as well as future liabilities.
Though dependent on the detailed provisions, the new ‘dutyholder’ regime will likely open up additional areas of risk for insurers during the design and construction of buildings, and better enforcement and increased sanctions are a clear focus in the Bill. Insurers will continue to work with clients to assess and manage construction risk as new safety standards are introduced. The ‘golden thread of information’ requirements will also be of value to insurers in creating a more comprehensive audit trail of building management to refer to in their underwriting assessment.
Finally, we understand that the Accountable Person will apply for a Building Assurance Certificate, issued by the Building Safety Regulator. The extent to which this can be relied on by contractors and their supply chain and also purchasers and tenants seems unclear at present, as does any potential liability of the Regulator for the accuracy and competence of the certificate.
We are not best placed to answer this question but would observe that the required engagement between the Regulator and Residents Panel and between the Accountable Person and residents should assist, as should the introduction of a more transparent complaints process.
We are not best placed to answer this question.
We have no comments on this question.
We have no objections to the proposed structure but, whatever framework is used, adequate funding and coordinated multi-government department support is required. It is imperative that the HSE is properly resourced to give confidence to the construction industry, and insurers supporting professionals within it, that the current breakdown in regulation and enforcement will not be repeated. We also note that the HSE has suffered from significant cuts in funding since 2010 and any funding for the new regulator needs to be ringfenced so that it is spent on building reform and not used to cover funding shortfall in other areas of the HSE budget.
Yes. This legislation and creation of a framework represents the best opportunity to undertake a root and branch review of building safety. We understand why the focus has been on high-rise residential buildings but wider safety issues exist in other building size and types, which demand consideration. Proposed measures should be proportionate, cognisant of who will bear the ultimate cost of any measures and subject to industry consultation.
As an example, IUA would be supportive of considering measures such as mandatory Third Party Certification for construction firms, which is already utilised and required on some government construction projects. This would support industry in increasing standards for the products, services, processes, people and management systems that are employed by construction firms, making the industry safer, giving insurers greater confidence and creating consistency that under current legislation is not being achieved.
We would be pleased to clarify any of the above via the contact details below and otherwise look forward to continuing the dialogue on the issues raised as the Bill goes through the parliamentary process.