Commercial Property Insurance: Tragic Fire Sparks Ongoing Coverage Challengesstacie
In 2017, 72 people died in a fire at the Grenfell Tower in North Kensington, West London. According to the BBC, the fire started in a kitchen on the fourth floor before spreading and destroying the 23-storey tower block. Three years later, the tragedy has resulted in an ongoing legal battle as well as growing insurance challenges.
The Grenfell Tragedy
The BBC says the Grenfell Tower fire occurred after cladding – which turned out to be highly flammable – was added to the walls of the tower to make the building warmer and drier for the residents who lived there. It is possible that no one understood how dangerous the cladding could be before the fire claimed 72 lives, but the Grenfell Tower inquiry has concluded that the cladding was mostly to blame.
Survivors of the Grenfell Tower fire filed a lawsuit in the US against US manufactures over the flammable building materials, alleging that the materials turned the tower into a “flaming coffin”. However, according to Building, a US judge recently dismissed the case, saying it should be handled in the UK. It seems likely that the legal battle will continue.
The Insurance Implications
The Grenfell Tower fire was a massive tragedy for all involved. It has also had wide-reaching implications on property insurance. The Grenfell Tower was not the only building with potentially flammable cladding, and many property owners are now having difficulty securing affordable coverage.
According to Insurance Business, some apartment owners have seen their insurance premiums jump almost 800%. In Peckham, premiums went from £34,000 to £300,000, and in Paddington Walk, premiums went from £130,00 to £690,000. Some insurers are trying to split the risk with other insurers, while others are simply refusing to provide cover.
According to the Independent.ie, some commercial property owners have been denied coverage – possibly even when the cladding products in question are being used in ways that have been approved for safety. One business owner called the issue a bigger threat than COVID.
The insurance implications go beyond property insurance. The Grenfell Tower tragedy has also impacted professional liability insurance in the UK market. Insurance Business reports that many professionals, including architects, surveyors and contractors, have faced rising premiums that could jeopardize future projects, and some professional indemnity policies now have exclusions related to cladding.
This occurs at a time when commercial insurance rates are rising in general. According to XPRIMM, the Global Insurance Market Index shows that global insurance prices increased 20% in the third quarter of 2020. In the UK, the increase was even higher at 34%.
If you’re working to place a client’s commercial property coverage, start early and let them know what to expect. Costero Brokers can help you overcome many of the challenges you may encounter. Contact us to discover how our tailor-made solutions, steadfast underwriter relationships and passion for “finding a way” can help you succeed.