FCA investigates ‘crippling’ cladding insurance costs
The Financial Conduct Authority (FCA) is launching an investigation into the ‘crippling’ insurance costs paid by residents with cladding issues.
In letters sent today to chief executives of insurance firms, the City watchdog said it will be investigating whether “products provide fair value and premiums fairly and accurately reflect risk.”
The FCA will look into the firms’ approach to pricing for multi-occupancy buildings, examining if elements such as commissions – which are unrelated to risk – are the main cost driver.
The move come after housing minister Michael Gove requested the FCA to review the buildings insurance market, City PM reported.
Gove said in a letter to both the FCA and the Competition and Markets Authority (CMA) he was “extremely concerned” to hear from leaseholders about their “rapidly escalating” insurance premiums.
The secretary asked both bodies to work together and “make practical recommendations” to achieve “widely available and affordable cover,” assessing “the causes of the marked restriction in coverage available for multiple-occupancy buildings.”
On Monday, the shares of property developers and building material manufacturers plummeted after Gove threatened a UK trading ban on manufacturers of combustible cladding and insulation.
In a letter to the Construction Products Association, the secretary said that more than £700m in profit were made by three firms linked to the Grenfell Tower fire, which killed 72 people in June 2017.