insurance - Wilson Organisation

The Building Safety Act 2022 (BSA) introduced a wide range of new responsibilities and liabilities for property owners, developers, and those involved in the construction sector. These changes carry insurance implications that property owners and developers need to address to protect their businesses from the heightened risk.

Key Insurance Implications for Property Owners, Developers & Investors

Increased Liability Exposure: The BSA expands the potential for liability through mechanisms like the Building Liability Order (BLO), which can hold associated companies liable for building safety defects. Property owners and developers face greater financial exposure if found liable for historical or ongoing defects. Insurance policies may need to be reviewed to ensure that this expanded risk is adequately covered.

Legacy Issues and Indefinite Liability: The Act covers not just future works but also legacy liabilities for previous developments. This means property owners and developers could be liable for defects in buildings they no longer own or manage. Ensuring that Professional Indemnity (PI) insurance and Product Liability cover these long-tail risks is essential.

Increased Regulatory Scrutiny: With the introduction of the Building Safety Regulator, compliance failures can lead to substantial penalties including fines and, in some cases, imprisonment. Insurance policies must be aligned to cover regulatory risks and potential penalties, wherever possible.

Impact on Transactional Insurance: When buying or selling property or development projects, property owners and developers need to consider whether Warranty & Indemnity (W&I) insurance or other transactional policies provide sufficient coverage for BSA-related risks. The Act may influence the negotiation of terms around warranties, indemnities, and disclosures during property transactions.

Cost of Compliance: Compliance with the BSA will likely lead to increased operational costs for ongoing safety checks, remediation, and record-keeping. Property owners and developers may want to explore insurance products that help cover these additional costs, such as building warranties or latent defect insurance.

Directors & Officers Liability

The BSA places greater accountability on directors and officers for building safety, particularly in sectors dealing with high-risk buildings, construction and property management. This means they are now more exposed to liability risks for safety-related issues, including the potential for personal liability in case of non-compliance or negligence.

Here’s why Directors and Officers (D&O) Insurance is crucial in this context:

Increased Personal Liability: The Act introduces stringent obligations on senior management, making them personally accountable for building safety. D&O insurance provides financial protection if directors are held personally liable for breaches of duty, errors, or negligence.
Financial Impact of Legal Actions: Compliance failures under the Act can lead to substantial fines and legal actions. D&O cover can help manage these costs, covering defense expenses, fines (where insurable), and potential settlements.
Reputational Protection: Directors are accountable for maintaining a safe, compliant environment. D&O Insurance can offer support in case of legal scrutiny or investigation, safeguarding the company’s and individuals’ reputations.
Attracting and Retaining Talent: Knowing there’s a safety net against personal liability can be essential in attracting key people who may otherwise feel reluctant to take on roles with heightened accountability.
Coverage for Investigations: The Act’s proactive regulatory approach means that investigations may occur without specific claims. D&O insurance potentially can cover investigation costs, even if no formal claim is brought.

D&O insurance is a key consideration for those in the sector, offering the security needed to carry out their roles confidently, protecting their personal liability.

Why work with Wilsons?

Tailored Risk Management: We can help assess how the BSA specifically impacts your business and recommend tailored solutions that mitigate these new risks. This includes ensuring cover extends to liabilities arising from associated entities and legacy issues.

Up-to-Date Policies: We work with property owners and developers ensure their existing insurance policies are updated to reflect the new liabilities introduced by the BSA. This includes reviewing exclusions, limits and cover in PI, public liability, and other relevant policies.

Market Insight and Expertise: The insurance market is evolving in response to the BSA, and our team are aware of all emerging trends and new products. As usual, they provide guidance to our Property & Construction clients on which insurers are offering the best coverage for BSA-related risks, finding cost-effective solutions that balance protection and premium.

Conclusion

The BSA has introduced complex, far-reaching regulatory obligations that increase risk for many businesses within the property and construction sector, but also for investors and private equity sponsors. It is essential to understand these new liabilities and ensure you are adequately protected from these increased risks.

Contact

If you need help or support in understanding the impact of the BSA on the insurances for your property portfolio, new or existing developments, or current and future investments, get in touch.

Cyber security is a very real threat for SMEs, which account for 5.5 million businesses in the UK – and only a tiny percentage have cyber insurance in place, despite them being one of the most attractive targets for cyber criminals. Worryingly, the percentage of SMEs stating cyber security is a high priority has decreased from 80% in 2022 to 68% in 2023.

Many SME’s will look at their business and see the tangible risks such as fire, flood or theft, and may have made claims for these incidents in the past. Thankfully, most have never experienced a cyber attack and are unaware of the devastating impact this can have on a small business.

We have supported clients the sharp end of a cyber claim so we understand the impact this has on a business and the true value of cyber insurance – not only to compensate financially, but the incredible level of incident response they receive to deal with the attack, restore systems and mitigate against future threat.

The Government’s ‘Cyber Security Breaches Survey 2023’ revealed there were approximately 2.39 million instances of cybercrime across all UK businesses in the last 12 months – but only attacks on a few of the UK’s largest businesses such as British Airways or the BBC will make the headlines.

The survey also highlighted that ransomware is still at the forefront of the cyber threat landscape for UK businesses today. But there’s a continuing move away from cyber gangs just encrypting data to stealing data and threatening its publication instead – a trend which started back in 2019. Rather than the historic ‘smash and grab’, cyber criminals are spending far more time in networks, looking to steal information that will make victims feel obligated to pay the ransom to avoid disclosure.

Attacks are also becoming worryingly personal – unsurprising if they have accessed personal data, files and photographs. Victims are receiving harassing phone calls on personal numbers as the criminals move to using real-world intimidation rather than just cyber extortion to encourage business owners to pay. Saying they won’t release your CNC data is one thing, threatening family members is a whole different ball game.

Many of our clients are comfortable that they have sufficient cyber security in place. But cyber insurance isn’t simply there to replace investment in cyber security, in fact it’s quite the opposite. The specialist cyber insurers we work with will help you ensure you have the right security in place and keep you updated on emerging cyber threats – after all, they don’t want you to suffer a breach either! We all need to work together to ensure all businesses, whether big or small, are protected from cyber criminals.

It probably helps to think of cyber insurance as an emergency service. You probably wouldn’t say you don’t need breakdown cover as you have a really great car, you still want the comfort that should something happen, expert help to get you back up and running is just a phone call away.

If you don’t currently have a cyber policy in place and would like to understand the risks to your business and the cover available to you, just get in touch with me at [email protected], call on 0115 942 0111 or connect on LinkedIn