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12,000 projects at risk as insurance crisis pushes building control firm to brink of collapse
A private building control firm is being wound up, putting around 12,000 building projects at risk amid a wider insurance crisis for the sector, Inside Housing has learned.
Darlington-based Aedis Regulatory Services (ARS) has filed for voluntary liquidation after it was unable to secure insurance cover, according to the firm’s boss.
ARS was carrying out building control on around 12,000 projects, which is approximately 5% of the construction industry, according to its boss. Housing industry figures warned the wider crisis has "potential consequences for housing supply".
Joe Ayre, managing director of ARS, told Inside Housing: “Without insurance we can’t operate. For six weeks [since it expired], we haven’t taken any business in, we haven’t taken any money in. There’s no light at the end of the tunnel.”
The move is part of an ongoing crisis for ‘approved inspectors’, which are private companies qualified to inspect construction work for compliance with building regulations.
They compete against local authorities to win contracts from construction firms.
However in recent weeks it has emerged they are struggling to find the necessary insurance to work - as the ongoing cladding crisis and the potential associated liability drive insurers away.
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Two companies provide insurance to approved inspectors: Griffiths & Armour and Howden.
According to a letter from the regulator of Construction Industry Council Approved Inspectors Register (CICAIR), Howden has been unable to renew policies for its inspectors.
Mr Ayre said Griffiths & Armour declined his request to switch to their policy.
Of the 95 approved inspectors operating in the UK, 15 have insurance with Howden. Of these, five have seen their policies expire and four more are set to expire in less than a month.
When an approved inspector is forced to back away from a project, it is supposed to issue a cancellation notice so that the local authority can take over the work.
Barry Turner, director of technical policy at Local Authority Building Control told Inside Housing that emails from members suggest that inspectors are walking away from thousands of projects as a result of the insurance crisis.
He said that cancellation notices are not being issued and so local authorities are not legally allowed to take over the work, meaning the work should halt.
But Mr Turner added: “The work on site, as far as we are aware, hasn’t stopped. It’s effectively unregulated. To the best of our knowledge, nobody’s inspecting it.”
Mr Ayre told Inside Housing: “We’re trying to work our way through [the cancellation notices] but I’ve gone from 120 staff down to eight at the minute and most of them will be gone by the end of the week.”
A spokesperson for the Home Builders Federation said the insurance issue “potentially has implications for housing supply”, adding that it “is particularly impacting small and medium-sized builders”.
Inside Housing has also seen a letter from CICAIR, which regulates approved inspectors. Sent on Monday to all approved inspectors, it is thought to be the first time CICAIR has directly addressed the issue.
CICAIR threatened in the letter to de-register approved inspectors if they could not get new insurance 56 days after their previous policy expired.
CICAIR’s letter also warned that the Building Act 1984 requires that if an approved inspector “expects to become unable to carry out its functions”, it should issue a cancellation notice and inform the local authority.
Mr Turner told Inside Housing that LABC is getting “hundreds of emails a day on the subject”. He added that in many cases when an approved inspector has walked away, it has not left records of the work done. The council has had to restart the work, slowing down construction and increasing costs.
It is understood that Aedis Structural Warranties, a separate company to Aedis Regulatory Services, is unaffected and remains a going concern.
In a statement to Inside Housing, Howden said: “The strict insurance criteria set in 1996 by the Secretary of State has not been modified to account for today’s challenging market conditions. Howden is one of only two brokers approved to arrange Professional Indemnity insurance for Approved Inspectors, and the current situation has put incredible pressure on the only compliant scheme available.
"Howden is working with our clients to solve this issue, and has been in conversation with the Ministry of Housing, Communities & Local Government for a number of months, recently submitting a full and detailed proposal for changes to the insurance criteria. If accepted, this would provide a practical solution to the problem.”
UPDATE: at 12.30pm, 19/07/19 This article has been updated. The original article said that Howden was an insurance provider.
Both companies are in fact brokers of insurance for approved inspectors.
The initial story also said that Howden had decided not to renew their insurance policies. Howden has said that as an insurer, it has no policies to renew. Howden’s scheme insurer withdrew from underwriting PI insurance at the end of last year, and since then it has attempted to replace its insurer.
The article also now includes a full statement from Howden.
