The UK’s Professional Indemnity Insurance (“PII”) market is hardening, making it increasingly difficult for contractors and consultants alike to obtain such cover on commercially viable rates and terms.
The Construction Leadership Council has found that nearly 30% of construction businesses in the past 24 months have been unable to purchase the required level of PII cover, while 44% have had three or more insurers decline to provide a quote for PII over their past two policy renewals.
Even when the required level of cover can be obtained, it is becoming ever more common to see insurers imposing strict limitations or exclusions of liability, as well as substantial excess amounts. Following the Grenfell tragedy, carve-outs relating to fire safety and cladding are particularly prevalent. It is thought that around 68% of PII policies now have restrictions on cover for fire safety, while just less than half of policies exclude cover for cladding claims altogether.
Such market volatility holds numerous consequences for contractors, consultants and developers, as well as third party stakeholders such as funders and future purchasers and tenants:
It remains to be seen how long the current difficulties in the PII market will continue for. In the meantime, all stakeholders should be mindful of the issues presented so that, together, they can best manage the risks involved.
For more information on this article please contact Laura Reeves.
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