Could Brexit affect Structural Warranties in the UK & Eire?
Brexit & Structural Warranties: Build-Zone has become a major force in the provision of Structural Warranties having started in 2003. Build-Zone were one of the first providers to achieve Designated Warranty Provider status by the Department of Communities and Local Government.
Build-Zone uses an in-house Technical Services Company – Build Zone Survey Services Ltd (BZSS), which operates separately under different management and can provide or arrange Building Control and other Technical Inspections using rigorously checked and audited construction professionals and “Approved Inspectors”, all of whom have to agree to specific Consultancy Agreements.
So what about BREXIT? Are there other things that you need to consider?
So far as Passported Insurers operating and accepting risks in the UK are concerned – Brexit will not make much difference, certainly initially, for example those Insurers based in places such as Gibraltar wanting to do business in the UK.
However, with regards to covering risks based within the EU then they will have to qualify and be compliant with Solvency II.
What is ‘Solvency II’ and what does it mean for Policyholders?
New rules which came into force in 2016 hopefully ensure a uniform and enhanced level of policyholder protection across the EU.
The new framework – like the current rules – applies to the majority of EU Insurers and Reinsurers.
Going forward with the UK having already gone through Solvency II– it is extremely unlikely that the UK will abandon the principles. Also of course if any UK Insurer wishes to trade with an EU Member State it is going to have to comply with Solvency II requirements.
So UK Insurers or those passported under the UK and who want to insure risks in Eire are going to have to make new arrangements which may include moving their Operations to EU countries – causing more financial stress to their business model.
With Solvency II there will be extra financial cost and as a Consumer you should be aware of what other business is underwritten by the Insurer to satisfy yourself of the long term risk analysis might be – for example if there is any long tail or open ended business being underwritten (such as Motor or Professional Indemnity).
Your choice of Insurer is becoming even more critical. Why?
Structural Warranty Insurance runs for 10 years whereas most insurance policies run for 12 months, will they still be there to pay claims? What happens if your insurer goes bust?
Should we be concerned about unrated Insurers?
Definitely – Security Rating is one of the basic indicators of the Insurers ability to pay Claims always remembering 10 years is a very long period.
Invariably one is told not to worry as they are covered under the Financial Services Compensation Service (FSCS) BUT the FSCS only pays up to 90% of any claim and does not provide cover for any
Company with a turnover over £1M. You could still have a substantial exposure and being a Creditor does not guarantee any payment.
Do you remember the following Insurers – they were “Unrated” and went bust!
QUINNS, SETANTA INSURANCE, ERIC, BALVAR, LEMMA….
Now Construction Specialist Gamble is in trouble and as a matter of interest the CEO of Gable has recently stated that he blames Brexit and Solvency Two for the collapse!
The Solicitors Regulation Authority (SRA) experienced the problem twice (on 12 month policies) and stated:
“The failures of Quinn’s and Lemma Europe is a warning to all companies about the risks of opting for an Unrated Insurer. There is a very high price to pay in these scenarios in a personal, as well as a business capacity. An official rating from an independent Ratings Agency (such as Standard and Poors, AM Best and Fitch) is the most objective measure of a Firms financial security”.
Consider the following carefully: 10 Year policies demand even closer scrutiny as the end result could be that you are left without a Warranty on your Property and if you wish to sell the Property then you will need to be able to purchase another Warranty for the remainder of the Policy period – unless it is going to be a cash sale/distressed purchase.
Even if you can find an Insurer who is prepared to do it you will still have very high Technical Audit costs in addition to high premiums.
How to Save Costs, get a better Service and faster quotes: There are many so called “Whole of Market” brokers out there who run their companies like a telesales operation with staff who have had little or no training.
They will ask you to complete a Proposal Form and then they will merely ‘broadcast’ or email this around Warranty Providers (such as Build-Zone) to try and get the cheapest quote, and then they will lump Fees on top.
When it comes to technical issues then there are few that have the knowledge required and who could care less. They are driven by Price and Commission levels.
Shorten the chain of command, reduce costs – COME TO US DIRECT.
We prefer to make sure that the job is done properly to start with. Whilst Building Control is more of a tick box exercise to comply with Building Regulations, Technical Audits need to be done on behalf of Insurers as they are covering that building or Development for 10 (or 12) Years and to us “Prevention is better than Cure”.
BZSS is unique and totally Client driven. We believe that to be effective Inspections should be done by independent Professionals. Everything that is done by way of Inspections is further audited by the Team in BZSS giving Clients a further layer of protection.
The Team is led by a Building Surveyor, Building Engineer and specialist Loss Adjuster – so they have a thorough understanding not only of Construction and the Building Regulations but also what can go wrong having had extensive experience of claims over many years.
“We work from the back coming forward”. Our aim is to make sure that your Project, no matter how large or small, is delivered on time with the minimum of problems and hopefully on budget.
If you choose a BZSS audited and contracted Approved Inspector who works to BZSS requirements we can combine Building Control with Technical Audits – saving you time, inconvenience and considerable Fees.
Build-Zone will be exhibiting at MIPIM UK based at the Olympia in London from the 19th – 21st of October 2016.
If you would like to come and talk to us, find us on stand G11/13.