Briefing on RICS' 2021 Minimum Policy Wording - Thursday 29th April 2021
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Briefing on RICS’
2021 Minimum
Policy Wording
Thursday 29th April 2021
© 2020 RICS
Learning Objectives 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 © 2020 RICS
Market Mapping
Soft Market
Hard Market
Softening Market
Financial Crisis
Jackson Reforms
Source: ARP Insurer NPW Returns
© 2020 RICSConsultative Timeline
September
Temporary Blanket dispensation granted in March 2020 to assist the market:
➢ Discussions with the IUA
Fire Insurer withdrawal from the market
Insurer claims experience
Safety Uncertainty in Building Regulations
December “Last man standing”
➢ Outlined approach to insurers
➢ Member Consultation
January / February Silent IUA approached regulators in September 2020
From the outset agreed to clarify the wording, but, not restrict coverage which should be provided
➢ Discussions with prescribed
Cyber
insurers
➢ Discussions with the IUA
➢ Call for information re. fire safety
March Market Affordability and availability of professional indemnity
➢ Automatic fire safety
dispensation to 01 May
© 2020 RICSFocus 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 RICSFocus on Fire Safety 4 Storey’s or less 5 storeys or more ➢ No exclusion ➢ Insurer exclusion can apply ➢ £1m aggregate / cost inclusive cover. © 2020 RICS
Example: Compliant market write back endorsement
Fire combustibility endorsement (RICS Wording) 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
- Fire combustibility exclusion (five storeys and above) used in the construction, alteration, repair, treatment or refurbishment of any building or
- Aggregate limit, defence costs inclusive of limit, excess applies to defence structure to comply with applicable regulations in respect of the performance of
costs (four storeys combustibility,
and below) fire resistance or fire protection and where such claim or claim circumstance relates
The following applies to your policy. This will apply irrespective of anything contained to any building four storeys or less above ground level, not including basements or
in your policy to the contrary mezzanine levels but including the ground floor regardless of use the following applies
In respect of any claim or claim circumstance arising from any professional Aggregate limit, defence costs inclusive, excess applies to defence costs
business undertaken in relation to any building five storeys or more above ground The most we will pay in total for all claims, defence costs, loss, claimant’s costs, fees,
level, not including basements or mezzanine levels but including the ground floor expenses or any other costs in any one period of insurance is the limit of
regardless of use, the following applies indemnity.
The excess does apply to defence costs but does not apply to Court attendance costs
The definition of Claim(s) in your policy is deleted and replaced by the following cover or Formal investigation costs cover.
Claim(s) You agree that the RICS Difference in conditions clause in your policy does not apply
Any verbal or written demand, notice or communication from a third party to this endorsement.
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 RICSExample: Non-compliant market write back endorsement 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 © 2020 RICS
EWS1
PROFESSIONAL BUSINESS shall mean: ➢ Included in 2020;
17.1. those services (including the giving of ➢ Rationale – deemed material disclosure;
advice) which are undertaken by
members of the Royal Institution of ➢ Where a member undertakes or has undertaken
Chartered Surveyors (or have otherwise such activity then to satisfy their demands and
been declared to INSURERS) and which needs, no fire safety exclusion should apply;
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.
© 2020 RICSDispensations
➢ 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 RICS will respond to the specific
dispensation is required point raised and will not provide a
general dispensation
Exposure and claims experience
Proposal Form and claims experience will form basis of dispensation
consideration
Language If a wording query the specific
wording is required
Evidence of market exercise Comfort that a fair market
analysis has been undertaken
© 2020 RICSARP
Entry criteria:
For distressed firms:
For non-distressed firms
12 month period
➢ RICS registered firms
4 month Provisional period
Business Review
No business Review
➢ Declinature or constructive
Limit: £1,000,000
8 month subsequent period
Aggregate plus unlimited round the clock
declinature (or terms not
Limit: £1,000,000
Aggregate coverage
reinstatements received within 7 working days
RICS Compliant Wording and Coverage of renewal)
➢ Non-compliant cover
Assigned Risk Information requirements:
Pool
➢ Proposal Form
➢ Confirmed Claims Experience
Bi-par coinsurance
12 month policy period
Run-off
➢ Expiry Schedule
No business Review
Limit: £1,000,000
12 month period
No business Review
➢ Evidence of Declinature
Aggregate plus unlimited round the clock
Limit: £1,000,000 Compliance Requirements:
reinstatements
Can follow any listed insurer
➢ Miller Agency
© 2020 RICSDispensation Case Study
£6.7m Firm, 10 Year Incurred £6k Market Response
➢ 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
➢ 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
Outcome
➢ Broker renegotiated and obtained expiry terms
© 2020 RICSUpcoming 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 RICSQuestions? © 2020 RICS
Learning Objectives 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 © 2020 RICS
Thank you
Contact:
Mark Carver, Miller Insurance & RICS PII Advisor -
mark.carver@miller-insurance.com
Hugh Garnett, Senior Policy Specialist, RICS –
hgarnett@rics.org
© 2020 RICSYou can also read
