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© 2020 RICS
Briefing on RICS’
2021 Minimum
Policy WordingThursday 29th April 2021
© 2020 RICS
By attending this event, delegates should be able to:
• Understand the historical development of the RICS Professional Indemnity market
• Understand the RICS approach to fire safety and professional indemnity insurance
• Understand the RICS dispensation process
• Understand the access and availability of the RICS Assigned Risks Pool
Learning Objectives
© 2020 RICS
Market Mapping
Source: ARP Insurer NPW Returns
Soft Market
Hard Market
Softening Market
Financial Crisis
Jackson Reforms
© 2020 RICS
Consultative Timeline
Temporary Blanket dispensation granted in March 2020 to assist the market:
Insurer withdrawal from the market
Insurer claims experience
Uncertainty in Building Regulations
“Last man standing”
IUA approached regulators in September 2020
From the outset agreed to clarify the wording, but, not restrict coverage which should be provided
Affordability and availability of professional indemnity
Fire
Safety
Silent
Cyber
Market
September
➢ Discussions with the IUA
December
➢ Outlined approach to insurers
➢ Member Consultation
January / February
➢ Discussions with prescribed insurers
➢ Discussions with the IUA
➢ Call for information re. fire safety
March
➢ Automatic fire safety dispensation to 01 May
© 2020 RICS
Focus on Fire Safety
➢ Fire Safety is not dealt with in the minimum wording
➢ The issue is dealt with in the insurer participation agreement (contract between insurers and the RICS) whereby insurers agree to provide terms as per the minimum wording
➢ Within this agreement the RICS provide a dispensation in respect of fire safety but do not allow insurers to apply a fire safety exclusion in respect of:
Any building of four storeys or less (not including basements or mezzanine levels) or less above ground level, including the ground floor, whether used for residential, commercial, parking or other use.
➢ Insurers can:
Provide coverage on an aggregate / cost inclusive basis in respect of such claims;
Make the excess applicable to defence costs
➢ A fire safety can apply above four storeys
© 2020 RICS
Focus on Fire Safety
4 Storey’s or less 5 storeys or more
➢ No exclusion
➢ £1m aggregate / cost inclusive cover.
➢ Insurer exclusion can apply
© 2020 RICS
In respect of any claim or claim circumstance arising directly or indirectly out of, or in
any way connected with, any actual or alleged failure of any product, material or system
used in the construction, alteration, repair, treatment or refurbishment of any building or
structure to comply with applicable regulations in respect of the performance of
combustibility,
fire resistance or fire protection and where such claim or claim circumstance relates
to any building four storeys or less above ground level, not including basements or
mezzanine levels but including the ground floor regardless of use the following applies
Aggregate limit, defence costs inclusive, excess applies to defence costs
The most we will pay in total for all claims, defence costs, loss, claimant’s costs, fees,
expenses or any other costs in any one period of insurance is the limit of
indemnity.
The excess does apply to defence costs but does not apply to Court attendance costs
cover or Formal investigation costs cover.
You agree that the RICS Difference in conditions clause in your policy does not apply
to this endorsement.
Example: Compliant market write back endorsement
Fire combustibility endorsement (RICS Wording)
- Fire combustibility exclusion (five storeys and above)
- Aggregate limit, defence costs inclusive of limit, excess applies to defence
costs (four storeys
and below)
The following applies to your policy. This will apply irrespective of anything contained
in your policy to the contrary
In respect of any claim or claim circumstance arising from any professional
business undertaken in relation to any building five storeys or more above ground
level, not including basements or mezzanine levels but including the ground floor
regardless of use, the following applies
The definition of Claim(s) in your policy is deleted and replaced by the following
Claim(s)
Any verbal or written demand, notice or communication from a third party
1. making an assertion for legal remedy or any other form of compensation or remedy
2. containing reference to, or serving notice of, intent to start legal proceedings
3. invoking any pre-action protocol as set under the Civil Procedure Rules and/or
4. referring to arbitration, adjudication or complaint proceedings
5. alleging or asserting the rendering of any property unfit for habitation
b. The following is added to your policy
Fire combustibility exclusion
We will not cover any claim or claim circumstance arising directly or indirectly out
of, or in any way connected with, any actual or alleged failure of any product, material
or
system used in the construction, alteration, repair, treatment or refurbishment of any
building or structure to comply with applicable regulations in respect of the
performance of combustibility, fire resistance or fire protection.
© 2020 RICS
In the event of a fire safety notification, arising from the professional business of approved inspectors, architecture, CDM co-ordination and planning supervision, clerks of work and/or employer’s agents, the limit of indemnity will be no greater than the limit of this insurance, in the annual aggregate, including defence costs (up to £2,000,000 in the annual aggregate, including defence costs.
However, in respect of Clause 3.1 Excess, the amount of the excess shown in the schedule, resulting from claims arising from fire safety notifications, as a result of the professional business of approved inspectors, architecture, CDM co-ordination and planning supervision, clerks of work and/or employer’s agents, defence costs will be subject to the excess.
Furthermore, insurers will not be liable under this insurance for that portion of any claim arising directly out of the combustibility or fire safety defects of any external cladding systems; glazing, doors, external wall system and / or internal wall system (including insulation and fire breaks) of any building or structure, which do not comply, or are alleged not to comply, with The Building Regulations for England & Wales 2010, Building (Scotland) Regulations 2004 or The Building Regulations (Northern Ireland) 2012 or of any re-enactment.
For the purposes of this endorsement, Fire Safety Notification will mean
Any claim or circumstance directly or indirectly arising out of or connected to the fire resistant and/or fire retardant characteristics of external cladding systems
Example: Non-compliant market write back endorsement
© 2020 RICS
PROFESSIONAL BUSINESS shall mean:
17.1. those services (including the giving of
advice) which are undertaken by
members of the Royal Institution of
Chartered Surveyors (or have otherwise
been declared to INSURERS) and which
are performed by or on behalf of the
PRACTICE within the TERRITORIAL
LIMITS other than the completion of
the EWS 1 (or as revised) unless
specifically declared to, and agreed
by, INSURERS.
EWS1
➢ Included in 2020;
➢ Rationale – deemed material disclosure;
➢ Where a member undertakes or has undertaken
such activity then to satisfy their demands and
needs, no fire safety exclusion should apply;
© 2020 RICS
➢ RICS are taking a pragmatic approach and will consider dispensations
➢ To make a decision the following information is required:
Specific request on the point where a dispensation is required
Proposal Form and claims experience
Language
Evidence of market exercise
Dispensations
RICS will respond to the specific
point raised and will not provide a
general dispensation
Exposure and claims experience
will form basis of dispensation
consideration
If a wording query the specific
wording is required
Comfort that a fair market
analysis has been undertaken
© 2020 RICS
Entry criteria:
➢ RICS registered firms
➢ Declinature or constructive declinature (or terms not received within 7 working days of renewal)
➢ Non-compliant cover
Information requirements:
➢ Proposal Form
➢ Confirmed Claims Experience
➢ Expiry Schedule
➢ Evidence of Declinature
Compliance Requirements:
➢ Miller Agency
ARP
For distressed firms:
4 month Provisional period
Business Review
8 month subsequent period
Limit: £1,000,000
Aggregate coverage
For non-distressed firms
12 month period
No business Review
Limit: £1,000,000
Aggregate plus unlimited round the clock reinstatements
RICS Compliant Wording and Coverage
Bi-par coinsurance
12 month policy period
No business Review
Limit: £1,000,000
Aggregate plus unlimited round the clock reinstatements
Can follow any listed insurer
Run-off
12 month period
No business Review
Limit: £1,000,000
Assigned Risk Pool
© 2020 RICS
£6.7m Firm, 10 Year Incurred £6k Market Response
Dispensation Case Study
➢ Two brokers advised coverage was not available in the market and put up terms with a blanket fire safety exclusion
➢ Dispensation sought
ARP➢ Terms provided as compliant cover not available
RICS Dispensation
Outcome
➢ Provided subject to the member confirming it was “adequate and appropriate”; evidence that the MGA had referred the risk to the lead insurer and subject to broker recommendation taking into account the ARP terms
➢ Broker renegotiated and obtained expiry terms
© 2020 RICS© 2020 RICS
Upcoming RICS priorities
• Government intervention – EWS1 PI Scheme
• RICS Review of PII Requirements:
➢ Review UK requirements
➢ Focus on valuation
➢ Additional support and guidance for firms
➢ How we work with insurers and brokers
© 2020 RICS
Questions?
© 2020 RICS
By attending this event, delegates should be able to:
• Understand the historical development of the RICS Professional Indemnity market
• Understand the RICS approach to fire safety and professional indemnity insurance
• Understand the RICS dispensation process
• Understand the access and availability of the RICS Assigned Risks Pool
Learning Objectives
© 2020 RICS
Thank you
Contact:
Mark Carver, Miller Insurance & RICS PII Advisor [email protected]
Hugh Garnett, Senior Policy Specialist, RICS –[email protected]
