Building insurance

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 could 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
• 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
• 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.

The cost of your building insurance is determined based on the estimated cost to rebuild your individual property, rather than the entire block. For the period from April 1 2023, to March 31 2025, the actual costs have been allocated by THCH using the insurer's property-by-property assessment. THCH has partnered with an independent broker to secure an appropriate building insurance policy, which includes coverage for property damage, acts of terrorism, and your liability as a property owner, all while ensuring the lowest possible excess payment.

In addition to your standard building insurance, you may have been charged an 'excess layer premium.' This additional coverage is required because your building is considered higher risk by insurers. We are actively working to reduce these risks, with the goal of lowering future insurance costs and enhancing your building’s safety. All high-risk remediation projects are on track for completion by 2026. Where buildings have required an excess layer, the premium has been allocated to each property by reference to rebuild costs.

If this charge is not included in your personal statement, then it does not apply to you.

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. The contract was renewed in 2023 for a one-year period, and again in 2024 for one-year.

THCH. This expense is not passed onto leaseholders.

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.

The main building insurance policy is provided by Protector. You can find the policy here.

The insurance premium is for one year only and therefore a Section 20 is not required.

As per the terms to your lease, THCH (the freeholder) must provide building insurance to your building.

No. Building insurance is covered by a tenant's rent.

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 under our management are insured adequately, without risk of under-insurance, we have assessed the individual rebuild costs. With this information, we have revised our allocation approach and will use rebuild costs as the basis for allocating insurance charges, whereas in the past we allocated insurance costs based on the number of bedrooms in a property. The adjustments to the overall premium and the rebuild cost of your property will be reflected in your September 2024 annual actuals statement. 

We want to express our sincere apologies for any confusion that may arise from this.

You should have recieved your building insurance estimate for 2024-25. The charge is based on next year’s expected insurance premiums and the cost to rebuild your property.

Recent economic changes and the departure of insurers from the social housing sector have led to higher premiums. In 2023, we made a significant investment to assess the rebuild costs of all THCH-managed properties to ensure sufficient insurance was placed. With this information, we have revised our allocation approach and use rebuild costs as the basis for allocating insurance charges, whereas in the past we allocated insurance costs based on the number of bedrooms in a property.

Service charges 2024

If you’re struggling to make the payment, please get in touch with our income team who will be able to support: income.recovery.team@thch.org.uk

Once you receive your charge, if you’re unhappy with the amount, your option is to go through a first-tier tribunal.