What Do Landlords And Tenants Need To Know About Insurance For Multi-Occupancy Buildings In The Wake Of The Grenfell Tragedy?

• Published date: 21 June 2023
• Subject Matter: Insurance, Real Estate and Construction, Insurance Laws and Products, Landlord & Tenant - Leases
• Law Firm: Thomson Snell & Passmore
• Author: Ms Kimberley Ramsey

One of the many ongoing impacts of the Grenfell Tower disaster, is that it has led insurance premiums for multi-occupancy buildings to increase significantly.

The Financial Conduct Authority (FCA) therefore published a report setting out its recommended measures to increase the availability and affordability of insurance for multi-occupancy buildings.

The report highlights a number of key issues including the practice of insurance firms sharing commissions with managing agents and freeholders.

A full copy of the report is available here.

What happened after the FCA's report on insurance for multi-occupancy buildings?

In response to the FCA report (in January 2023) Michael Gove, Secretary of State for Levelling Up, Housing and Communities, published a letter expressing concern about the lack of regulatory protections for leaseholders. He made it clear that widely available and affordable buildings insurance is one of his "top priorities".

His letter therefore asked the FCA to:

• Present its implementation plan for reforms by summer 2023
• Investigate higher broker commissions by March 2023. Then meet with the Building Safety Minister to confirm what actions it will take
• Continue pressing the industry with regard to the industry-led scheme to lower the highest premiums for buildings with significant fire safety issues. The scheme to be implemented before summer 2023
• To deliver a new code for fire safety risk information to improve data collection with the Association of British Insurers (ABI) and British Insurance Brokers Association (BIBA) by the end of February 2023. This will be key to assessing market trends in order to address the issues highlighted by the report

The letter concluded by making it clear that he will "take action to ban managing agents, landlords and freeholders from taking commission and other payments when they take out buildings insurance, replacing such payments with more transparent fees".

A full copy of Michael Gove's letter is available here.

What happened in response to Michael Gove's letter?

• On 28 February 2023 the ABI and BIBA launched a code on core risk data for multi-occupancy buildings over 4 storeys or 11 metres in height affected by combustible cladding or other material fire risk issues. This is necessary in order to understand key market trends.
• The FCA published a review (April 2023) of its multi-occupancy buildings insurance broker remuneration.

The review highlights a number of key concerns including:

• Levels of...