Sinead Campbell from Flat Living Insurance explores the current difficulties, the progress made so far regarding cladding remediation and government-backed interventions, and the outlook for 2025.
The UK’s cladding crisis began in 2017, with the tragic fire at Grenfell Tower. The external cladding was unsafe and massively escalated the fire which killed 72 people. The incident exposed the dangers of unsafe cladding and led to years of scrutiny, policy changes and remediation efforts.
Here in 2024, owners and residents of buildings finished with hazardous cladding continue to face significant challenges in making their properties safe, but also with securing appropriate insurance.
Rising premiums, limited options for coverage, and complex regulations all create obstacles for property owners and leaseholders. Here we’ll be exploring the current difficulties, the progress made so far regarding cladding remediation and government-backed interventions, and the outlook for 2025.
The Struggle to Insure Cladded Buildings in 2024
In 2024, the insurance market for cladded buildings remains restrictive and costly. Buildings with dangerous cladding materials, such as ACM (Aluminium Composite Material) and HPL (High-Pressure Laminate), are classified as high-risk by insurers.
This classification has led to substantial premium increases and, in some cases, a complete refusal to provide coverage. Insurers assess these properties as highly vulnerable, often demanding expensive remediation work before even considering a policy.
Many property owners and leaseholders have been forced into a corner, faced with either paying higher premiums, or living in uninsured buildings. This scenario is especially challenging for leaseholders, who often have little control over the remediation process and its costs.
Consequently, the demand for insurance for cladded buildings far outweighs the supply, making it a sellers’ market for insurers.
Cladding Remediation: Progress and Hopes for Change
Remediation efforts have been a priority in the years following Grenfell, with government funding schemes such as the Building Safety Fund aiming to support affected buildings.
Unfortunately, many buildings are still awaiting these essential upgrades. Despite substantial investments, the progress of cladding removal and replacement has been slower than anticipated, with construction costs and timelines and the availability of skilled labour often contributing to delays.
The Government have now pledged that all cladded properties will be completed by 2029 and industry analysts hope that a quicker pace of remediation in the coming years will improve insurability. As more buildings are brought up to the latest safety standards, insurers may become more willing to offer affordable policies. However, this depends heavily on how efficiently the remediation projects can be completed.
The Ongoing Challenge of Affordable Coverage
The high cost of insurance for cladded buildings is an ongoing concern. Premiums have reached levels that are difficult for many owners to bear, and for those who can obtain coverage, the policy terms are often restrictive.
Buildings awaiting cladding removal or replacement face specific challenges, as insurers often see them as liabilities. This situation has left some properties in a kind of limbo where they are insured, but only at a high rate that adds financial strain to residents.
Even with cladding remediation, many buildings still face high premiums due to the perceived risk. Insurers argue that until all safety risks are addressed, premiums will continue to reflect these heightened hazards. With leaseholders often expected to pay towards remediation costs, many residents feel trapped, caught between paying for both safety upgrades and higher premiums.
Cladding Remediation Funding and Its Impact on Insurability
Government funding has been a lifeline for many buildings undergoing remediation. The Building Safety Fund, alongside other financial initiatives, aims to cover some or all of the costs associated with cladding removal and replacement. These funds have allowed many buildings to start their remediation work, improving their safety and, potentially, their insurability. However, there is still a long way to go.
One issue is that some buildings don’t qualify for these funds, leaving owners responsible for high remediation costs. This lack of funding slows down the remediation process and keeps such buildings in the “high-risk” category. As a result, their insurability remains limited, with few insurers willing to offer affordable coverage.
The availability and efficient allocation of funding will play a crucial role in determining whether more buildings can complete the necessary upgrades, potentially making insurance more accessible in the future.
Government-Backed Insurance Schemes and Intervention
Recognising the challenges faced by cladded buildings, the UK government has explored several intervention strategies. Some advocates call for government-backed insurance schemes specifically designed for high-risk buildings that are waiting for remediation. This concept could provide a safety net for those struggling to secure coverage.
A government-backed insurance scheme would help stabilise premiums and offer more affordable coverage for buildings with unsafe cladding. In the current landscape, this could alleviate the financial burden on residents, especially in cases where remediation efforts are delayed.
However, while the idea is gaining traction, implementing it requires significant planning, collaboration with the insurance industry, and an understanding of long-term sustainability.
Predictions for Insurance Accessibility in 2025
As the pace of cladding remediation increases, 2025 may well see improvements in insurance accessibility for cladded buildings. Insurers may become more open to offering standardised, affordable policies for buildings that have completed safety upgrades. Additionally, if a government-backed insurance scheme is introduced, it could provide immediate relief to those in high-risk properties.
Much depends on the rate of remediation, the Government’s commitment to their 2029 goal, and insurers’ willingness to adjust their criteria as safety standards improve. For buildings still undergoing remediation, insurance options may remain limited, but as more properties meet updated safety standards, the pressure on insurers to provide affordable coverage will likely increase.
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