IN THIS SECTION:

What we do

Insurance

In the UK, it is common for commercial property landlords to purchase insurance for their buildings (as the sole policy holder) and to charge occupiers for that insurance. Our interest lies in two areas - that the insurance needed continues to be available at a resonable price, and that the charge made for it by landlords is transparent.

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What's the issue

Two issues in particular - flooding and terrorism - are a cause of concern to our landlord and insurance company members, both in terms of purchasing and providing the cover. There is also a move, which we support, to increase the level of transparency provided by landlords in arranging the buildings insurance.

Flooding

Landlords depend on the availability of reasonably priced insurance cover for their buildings, including the risk of flooding. Climate change has increased the risk of flooding, both in terms of frequency and severity, bringing with it the risk that the insurance industry may either re-price flood insurance cover or withdraw it altogether. Steps need to be taken by the government and other responsible bodies to provide effective flood defences and other measures to reduce the risk of flooding, and the damage it causes, so that insurance companies continue to provide insurance cover at an affordable price.

Terrorism

We are concerned that not all of the risks and impacts that can arise from modern terrorist attacks are covered by the insurance policies currently available. Many property insurance policies cover physical loss or damage, and associated business interuption costs, but do not cover situations, such as in chemical, biological or nuclear attacks, where physical damage does not occur, but where costly and lengthy decontamination may be required.

Transparency

Our position on insurance commissions has always been to seek full transparency, in line with the recommendations of the Commercial Lease Code 2007. Landlords are not currently required to be licensed by the FSA for arranging insurance for their buildings.

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Why is it important

Companies need to be able to cover their risks. A lack of insurance, or excessive insurance costs, can have a significant impact on the ability of businesses to function. If property companies are unable to get cover for their insurance risks, the impacts could include a reduction in the value of the buildings at risk, the rendering of sites as unsuitable for development, and, should insurance not be available at all, it will prevent the properties affected from being bought and sold.

Flooding

Were insurance cover for the risk of flooding to become unavailable, or prohibitively expensive, landlords would be open to breaching the covenants of their leases (and be open to losing their occupiers), developers would find it hard to develop, and properties would not be able to be sold. This would have serious and wide ranging ramifications for our industry.

Terrorism

The risks associated with terrorism are changing. Biological, chemical and nuclear attacks on buildings are perceived as an increasing risk. We wish to ensure that property owners are covered by Pool Re (a mutual insurer set up by the UK government) for all risks relating to terrorism.

Transparency

We feel it is important for landlords to declare any commissions they receive for arranging insurance cover for their buildings. This is inline with increasing regulation from Europe, which requires ever increasing levels of transparency in the commissions charged for insurance products.

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What we're doing about it

Our Insurance Committee, which includes representatives from landlord and insurance members, is particularly active in addressing these issues.

The committee provides a forum where mutual concerns can be aired, and a consensus can be created for responding to government consultations. We have increased the profile of our members' interests through responding to government consultations on insurance subjects and by holding events for members focusing on particular areas of insurance policy.

The most important consultation documents we have responded to recently are:

the Thames Estuary TE2100 Strategy

the draft Floods and Water Management Bill

the RICS consultation on transparency in professional fees.

Insurance contact

Ian Fletcher

Director of Policy

(Real Estate)

ifletcher@bpf.org.uk

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