Decision details

The lease agreement between the Council and residential leaseholders requires the Council, as freeholder, to arrange building insurance to cover the re-instatement value of the leaseholder’s asset. The current insurance provider, Avid indicated a renewal increase of 60% due to the claims experience and inflation. As this was deemed unacceptable, we sought alternative quotation from the Councils main insurance programme provider, Protector. However, shortly after providing their renewal terms, Avid advised that their underwriting provider, Accelerant, had made the decision to withdraw their capacity, leaving Avid unable to accept new business or offer renewals beyond 23 March 2023. Their earlier terms are therefore withdrawn.
A quotation was obtained from Protector Insurance, the Council’s insurer for the main Property and Liability risks. Due to the dire state of the leasehold insurance market, it was considered preferable to enter into a one-year arrangement and then be in the position in 2024 to re-tender the Council’s full insurance programme and also consider any other available options. Additionally, it is hoped the situation will have improved in 12 months, including the re-entrance of Avid, should they secure an alternative provider. The Council has in place an agreement with Protector to provide Property and Liability insurances. Incorporating the residential leasehold cover considered a variation of this contract.

REASONS FOR URGENCY:
The existing leasehold Buildings insurance expires 31/03/2023. An urgent decision is required to ensure cover continues from 01/04/2023.The lease arrangement requires the Council as freeholder to arrange buildings insurance cover. Failure to place insurance would leave the Council financially exposed and be in breach of lease requirements.

1.    To note that Appendix 1 is not for publication on the basis that it contains information relating to the financial or business affairs of any particular person (including the authority holding that information) as set out in paragraph 3 of Schedule 12A of the Local Government Act 1972 (as amended).

2.    To direct award a contract to Protector for leasehold buildings insurance, including this within the main insurance programme for a period of one year with a £100 excess, effective from 01 April 2023, at a premium of £2,279,800.

Following the exit of all previous leasehold buildings insurers, Protector provide the only option available as no alternative market is available. Cover must be in place from 01/04/2023 as the lease arrangement requires the Council as Freeholder to arrange building insurance to cover the reinstatement value of the leaseholder’s asset.

Do not insure – not recommended. The lease arrangement requires the Council as Freeholder to arrange building insurance to cover the reinstatement value of the leaseholder’s asset. Not insuring is not therefore an option.

Insure with Protector – recommended. The insurance cover will provide financial protection for the Council and leaseholder in the event of an insured event including fire, storm and escape of water.