Building insurance

Since 2018, we’ve had a contract with Zurich Insurance Group to provide building insurance for our residential blocks. 

The insurance covers risks that could affect the building including:

• fire 
• lightning 
• explosion or earthquake 
• aircraft collision 
• storm, wind or flood 
• subsidence 
• some accidental damage 

Zurich’s contract ended on 31 March 2023. 

They told us last they would not be re-tendering for this contract because they're re-positioning themselves in the property market.

This reflects the public sector residential insurance market generally, where insurance providers have decided to concentrate on other types of insurance.

Securing a new provider

When we invited tenders to replace Zurich in November 2022 we did not receive any bids.  

If we cannot provide insurance it can cause substantial problems.

The lease requires us to keep the buildings insured for leaseholders. 

It does not allow alternatives like self-insurance where we would meet the cost rather than an insurance company, charging an appropriate premium to leaseholders.

If insurance cover is not in place, this would also:

• put homeowners' mortgages at risk
• restrict the re-sale or re-mortgaging of properties insured under the policy

Alternatives we explored

Another extension with Zurich 

Zurich only offered us an extra 3 months and the premiums were double that of 2022 to 2023. 

This offer was made on the basis that we had not received another offer.

London Insurance Consortium

London Insurance Consortium is a group of local authorities who tender collectively for insurance. 

The Consortium lead informed us they are not taking on new members now, so this option was not available to us.

A tri-borough framework

This is exclusive to 3 local authorities and therefore was not an option for Southwark.

Crown Commercial framework

Crown Commercial does not offer leasehold building insurance.

The private market

This was a last resort which proved impossible because the level of stock data was not available in the detail required to go out to the market.

New provider

On 16 March, Protector Insurance made an offer. We did not think we would get another offer, so entered into a contract with them from 1 April 2023. 

The rates they offered are around double those of Zurich. 

These costs will be reflected in the service charge adjustments issued in September 2024.

Service charge changes

Your estimated service charge for 2023 to 2024 (issued in February) included an 11% increase for building insurance in anticipation of an increase in the premiums. 

The extra cost of the premium will be charged within your actual service charge for 2023 to 2024 which is due to be issued in September 2024. 

You'll be able to pay any actual adjustment debit over the 6 remaining months of the financial year.

We used to receive a service fee from the insurer to reflect our management of the claims process. This covered our costs in managing the insurance contract.  

Protector Insurance will be managing the claims process directly, so our costs will be charged as part of the service charge in the future.

The insurance market

The leasehold building insurance market is in a so-called hard market phase with:

• premiums rising significantly
• restrictions in cover being introduced
• policy limits
• excesses being reviewed or introduced; and
• the withdrawal of capacity with insurers leaving the marketplace
• inflation is affecting the cost of claims and the cost of property reinstatement values.
• historically, profitability has been an issue due to the volume of claims and low or zero excesses being commonplace across the sector

Other local authorities in London are facing similar issues including:

• increased premiums
• increased excesses and difficulty procuring insurance for leasehold flats

The council, along with other London authorities, has written to the Secretary of State to raise concerns about the current conditions of the insurance market.

We're also carrying out individual property reinstatement valuations, and working to improve our claims experience overall.

First-tier Property Tribunal

We made an application to the First-tier Property Tribunal who will:

• make sure the contract complies with Section 20
• consider whether to give dispensation on the areas of Section 20 that we cannot comply with

Documents

• Dispensation application FTT decision (PDF)
• Southwark application for dispensation on S20 requirements (PDF)
• dispensation application (PDF)
• directions received from the residential property tribunal (PDF)
• new directions with extension of time for leaseholders June 2023 (PDF)
• notice of hearing and further directions, July 2023 (PDF)
• Midland Residential FTT email regarding properties at Southwark, August 2023 (PDF)
• coordination of leaseholders' responses (PDF)
• dispensation Southwark directions Sept 2023 (PDF)
• guidance on digital statements and bundles (PDF)
• FTT property chamber (residential property) Oct 2023 (PDF)
• email sent to the FTT on 27 October 2023 - coordination of leaseholder's responses 
• witness statements (accessible) (PDF) / witness statements (non-accessible) (PDF)
• copy of correspondence sent to FTT dated 24 November 2023 (PDF)
• application seeking permission to add further witness evidence and transfer claim to Upper Tribunal (PDF)
• email sent to FTT on filing application December 2023 (PDF)
• court directions in response to Southwark's application dated Dec 2023 (PDF)
• witness statement of Karen Hawkins dated 19 December 2023 (PDF)
• email to FTT on filing further witness evidence Dec 2023 (PDF)
• notice of hearing and further directions Feb 2024 (PDF)
• draft index to the hearing bundle (PDF)
• Southwark Council's skeleton argument (PDF) / authorities bundle (PDF)
• FTT Directions dated 10 June 2024 (PDF)
• respondents' application for CMH and Regional Judge Whitney's direction July 2024 (PDF)

More information

Get in touch if you're having problems paying your service charge. 

Find out more about the tender process, the market conditions and the approvals process.