Due to recent economic changes and insurance providers leaving the social housing market, insurance premiums have unfortunately gone up.
To ensure that all properties are insured adequately, without risk of under-insurance, we are currently in the process of reviewing the rebuild costs for all properties under our management. When this exercise is complete, there will be an adjustment to the overall insurance premium, and leaseholders will receive an updated charge.
To provide additional information and ensure clarity and transparency around the process, we have created a set of FAQs based on recent feedback.
Your understanding and cooperation are highly appreciated during this time.
Why has the buildings insurance premium increased so much?
Landlords and leaseholders across the country are experiencing soaring insurance costs. After the financial crisis of 2008/9, the insurance sector produced stable and relatively good rates of return on capital. These factors created a stable and favourable environment for insurance buyers for some 15 years. However, insurance premiums have not kept pace with claims inflation and a number of factors have now come together to create a ‘perfect storm’ for insurers resulting in a hardening of the market. Our brokers have informed us that this increase can be attributed to several factors:
- The pandemic, which has incurred costs of over $44 billion (£35 billion) for the insurance industry
- Escalating inflation, with a 19.4% surge in labour and material costs, in contrast to the 3% average in previous years
- Adjustments to the Ogden discount rate, compelling insurance companies to pay higher settlements for claims in relation to life-changing injuries
- The impacts of climate change, amplifying the likelihood and severity of damage from extreme weather events
- Modern Methods of Construction, which are less equipped to resist and endure fires and floods
- Unsustainable loss ratios, where the cost of providing insurance surpasses the premium revenue
- Increasing reinsurance expenses, with reinsurance costs soaring by 200%
- The social housing insurance market, has been marked by insurer withdrawals and a more cautious underwriting approach
- Alterations in underwriting methodology, considering overall exposure and potential for substantial losses more extensively
This information was shared with leaseholders as part of our previous letter.
What broker is THCH using?
THCH uses an established insurance broker, Marsh, to secure the most competitive rate. Marsh was selected as the broker through a competitive tender process in 2018, and the contract was renewed in 2023 for a one-year period.
Who pays for the broker?
THCH. This expense is not passed onto leaseholders.
Did THCH obtain its own quotes independently of advisors?
No. Sourcing insurance policies is a complicated technical process which an expert broker (Marsh) is required to conduct to ensure that the organisation has the appropriate level of insurance for the risks that it faces.
Why is it not due to be paid until September 2024?
As part of the lease agreement, leaseholders are obligated to cover the costs of the services they receive. THCH issues an estimated cost projection to leaseholders in February, followed by an 'actual charge' statement in the following September. This time frame ensures accurate calculation of the actual service charge spend.
Did THCH follow the Section 20 process?
The insurance premium is for one year only and therefore a Section 20 is not required.
Can I place my own building insurance policy and opt out of this charge?
As per the terms to your lease, THCH (the freeholder) must provide building insurance to your building.
Are leaseholders subsidising the costs for THCH tenants?
No. Building insurance is covered in tenant's rent.
Is the charge I received in July 2023 accurate?
When we wrote to you in July, we shared the new building insurance charge that we expected to be due in September 2024. At the time of that communication, we were using the best available information. However, to ensure that all properties are insured adequately, without risk of under-insurance, we are currently conducting a comprehensive rebuild cost exercise, funded solely by THCH. When this exercise is complete, there will be an adjustment to the overall insurance premium, and your charge will be updated.
We want to express our sincere apologies for any confusion that may arise from this.
Are you able to share any insight on costs for 2024-25?
We are unable to share any costs for 2024-25 at this time. We are actively engaging with insurers to provide them with enough information as possible, however there continues to be a number of external factors that are outside of our control making it impossible to predict next year’s charges.
What if I’ve set up a payment plan?
If you’ve set up a payment plan, we would encourage you to continue paying. Due to market conditions, it’s likely that the premium would have increased.
What do I do if I am unhappy with this charge?
Once you receive your charge, if you’re unhappy with the amount, your option is to go through a first-tier tribunal.
Make a claim
Your building insurance charge only covers the structure of your building, including fixtures and fittings. You must make your own arrangements to protect the contents of your home and personal possessions.
If you wish to make a claim under the buildings insurance, you should in the first instance contact our insurer Protector Insurance.