In many residential blocks of flats in London, the responsibility for insuring the property lies with the property management company, who need to insure the fabric of the building and the policy holders' liabilities.
However, as simple as this sounds, it is a complex area of residential insurance and it’s worth property managers knowing the key risks that they face when it comes to insuring residential property.
Let's look at the three insurance risks for residential property managers in London.
1. Risk of fire and flooding
London is awash with Victorian properties, many of which are now residential flats and house 54% of London’s population (1.8 million people).
Despite the stunning features such as high ceilings, feature fireplaces and bay windows, these properties generally have old pipework and sewer systems that can’t cope with the increase in people using them, particularly those properties that have been converted into multiple residences. These features make Victorian properties more susceptible to escape of water incidents due to the old pipework
Due to the way they are constructed, Victorian buildings often have timber features including the flooring, which can increase the risk of fire. In addition, over 90% of our residential property claims at Eggar Forrester are due to water damage generally caused by the pipework and include issues with modern dishwashers and the design of a residential block not being able to cope with today’s toilet systems.
Over half of the residential properties that we insure have a basement. Properties with basements, particularly in London, are being treated with caution by insurers due to the increased risk of flooding to these areas. It’s important to make sure your residential property insurance policy covers flooding where possible to the basement – one of our clients was very glad that their policy provided full flood cover when insurers paid their £1million flood claim.
If you have a basement in your property, it’s important to disclose this to insurers when obtaining quotations as failure to do so may invalidate any insurance claim.
It’s not just the Victorian properties that are potentially liable to flood. In 2015, a resident of the Heron Tower, a luxury residential skyscraper in the City of London, made a high-profile insurance claim after a burst water pipe caused significant damage to multiple apartments. The leak caused damage to the interior of the property and the high-value personal property for the impacted residents. The insurance claim was substantial due to the extent of the damage and the high value of the property and contents.
2. Risk of terrorism
Sadly, in today’s world, the risk of terrorism in capital cities across the world remains high. Standard policies may not cover terrorism, in the same way they do not cover acts of war, because of the potential scale of any losses. This is an additional cover. There are several reasons why you might need residential property insurance which includes terrorism cover, even if your property isn’t directly damaged:
· If your property is mortgaged or if you are a leaseholder, your mortgage or lease may contain a clause which stipulates you need to cover “explosion” or “all risks include terrorism cover. This was clarified in the 2014 QDime case whereby the judge rules the landlord should cover explosion. Whilst the threat of damage to the structure is relatively low, should there be a terrorist incident where the leaseholders cannot access the property, terrorism policies should include denial of access whereby insurers will pay for alternative accommodation for the residents. This was the case during the terror attacks on London Bridge, and many homeowners and businesses needed to claim on their insurance for alternative accommodation and business interruption
Risk of Riots and Civil unrest
· The recent riots across the UK have led to some of our clients asking about their policy and where they would stand if any future civil unrest impacted their property. Damage to buildings' main structure caused by riots, civil commotion, group vandalism and looting is usually covered by a standard property owners policy.
3. Risks during renovations and building works
With many residential property blocks in London being between 100 and 150 years old, they will need a maintenance programme to ensure residential property block to make sure they are compliant with modern standards and that the property is being maintained.
Often works are required to maintain the property, and its key to ensure the property manager checks that the contractor has the appropriate level of insurance before they start carrying out any building and repair work. If the property is damaged due to the contractors’ negligence, then a claim may be made under the contractor’s policy, so their insurance policy needs to be sufficient to cover the scope of work.
Also, the residential property manager would need to inform the insurance company for the block of the works taking place. As a starting point they would need to know:
· How long the works are expected to last
· Full details of the works
· If any hot works are due to be undertaken (as they may require a hot works permit or apply an increased excess, due to the increased fire risk)
· The contract value and who is responsible for insuring the works.
Most property owners' policies include cover for contract works with a limited value, however they may look to increase the contract works limit and charge the appropriate additional premium. Alternatively, a separate policy covering the works may be purchased or the contractor may have cover, however we would always recommend the residential block owner takes out the appropriate cover.
As you can see, residential property managers have a lot of responsibility when it comes to making sure the residential property block has sufficient insurance cover. Over the years, the team at Eggar Forrester has built up strong relationships with residential property owners and specialist residential property insurers to ensure we can deliver a broad range of cover at the most competitive premiums.
We also handle claims on behalf of the policyholder in house whereby ensuring we act on the clients and property managers behalf.
For more information about insuring your London residential property block, contact our team today.
About Martine Darkin
Martine has worked in residential property insurance for over 20 years and is a Director at Eggar Forrester. Throughout her career, Martine has gained experience in property and casualty insurance, indemnity, commercial insurance.
If you’re a residential property manager and would like to find out more about how Eggar Forrester can support you with residential property insurance, feel free to visit www.eggarforresterinsurance.com or connect with Martine via LinkedIn.