Biba welcomes new leasehold buildings insurance reforms

Biba has welcomed new reforms from the FCA that will support leaseholders in the multi-occupancy buildings insurance market. 

Earlier today (29 September 2023), the regulator announced it would force insurance firms to act in leaseholders’ best interests from 1 January 2024.

To do this, the FCA said that insurers will be banned from recommending a policy based on commission or remuneration levels, while they must treat leaseholders as customers when designing products.

Biba said it welcomed the introduction of the new policy stakeholder status for leaseholders and the increased transparency requirements.

“The statement coincides with extensive new work Biba has commissioned to help members better demonstrate fair value for the activities and services they provide in this sector,” a spokesperson added.

Fair value

This came after the FCA revealed in April 2023 that broker remuneration for insurance of multiple-occupancy residential buildings rose over a three year period.

In a letter to Biba on 17 April 2023, Michael Gove said the findings of the FCA about broker commissions for buildings insurance “are stark”.

Following the new FCA measures outlined today, Biba said work it had done to help members demonstrate fair value included introducing a new fair value assessment framework.

“Members can adapt this for their own business models to articulate, measure and evidence value for both the commission they retain and any commission they might share with freeholders and property managing agents (PMAs) for insurance related activities they undertake,” a spokesperson said.

“It also coincides with a new member pledge that Biba members are being asked to sign up to, which makes important commitments around remuneration practices for residential buildings over 11m in height that have material fire safety issues.”

New scheme

Meanwhile, in a letter sent to Gove earlier this year (27 April 2023), former Biba chief executive Steve White said that Biba’s primary focus “has been to solve the cost of insurance for buildings that have significant fire safety defects and have suffered the most in terms of insurance premium increases”.

Today, Biba said that it was in an advanced stage of its work with the ABI and McGill and Partners to launch a new fire safety reinsurance facility later this year.

This will allow a group of insurers to deploy more risk capacity for medium and high-rise residential buildings that have material fire safety issues.

“The aim of this scheme is to reduce reliance on expensive excess of loss reinsurance placements, which brokers need to purchase to ensure a building is fully insured and hence reduce the overall premium,” the association added.