Approved Inspectors: a conundrum facing the construction industry

Posted by Knight Frank Newcastle on 22nd November 2019 -

It’s no secret that the construction industry has been facing an issue with a proportion of Approved Inspectors (AI’s) who have had difficulties in, or have been unable to, renew their insurance policies. 

Previously, two providers offered insurance to AI’s – Howden (20% of the market) and Griffiths & Armour (G&A – 80% of the market). In spring 2019, Howdens confirmed their underwriter was pulling out of the market, leaving them unable to offer policies to new or existing customers. G&A confirmed in May 2019 that their underwriter would not be taking on any new risk, i.e. insuring any customers of Howdens who have lost, or will lose their insurance. 

I’ve been involved in a project monitoring scheme on a large distribution warehouse where the developer’s AI entered voluntary administration at the point their insurance policy expired. On this occasion, the responsibility for Building Regulation compliance was automatically passed onto the local authority. 

Fortunately, in this instance the individual Building Control Officer (BCO) at the Local Authority had relevant experience in industrial projects. However, as an industry we face a situation developing where there are fewer AI’s in the market, resulting in more work being passed onto Local Authorities. Whilst in some circumstances this can be satisfactory, Local Authority’s do not necessarily have the same level of experience and knowledge as AI’s and therefore cannot always deal with the matter as swiftly and proactively. 

As a department, Knight Frank Building Consultancy rarely use Local Authority Building Control, with the exception of the City of London surveying department where required. Currently, for larger projects scheduled for completion post expiry of our ‘go to’ AI’s, we’re recommending that our clients should appoint the local authority for a less risky approach.

However, the initial fears with the insurance situation now seem to have settled down. We’re now aware of Approved Inspectors who have successfully transferred over from Howdens to G&A. We’re also aware of Approved Inspectors who have renewed with G&A. 

Additionally, on 1st November this year, the Ministry of Housing, Communities and Local Government released confirmation of changes to the minimum requirements needed for Approved Inspector insurance. This effectively has realigned Approved Inspector insurance requirements with that of the construction market, and hopefully should increase the appetite for other insurers to provide Approved Inspector insurance. 

This, in combination with Approved Inspectors undertaking their own risk reduction measures to mitigate the possibility of non-renewal (i.e. not taking on high risk instructions), working to a bespoke client contract or signing collateral warranty, seems to be creating a positive outcome and we are being reassured that the previous instability has now passed.

Using an Approved Inspector should not necessarily be viewed as negative, however, it’s worth bearing in mind that if you do find an Approved Inspector willing to sign up to bespoke client contracts or collateral warranties, they may have increased their risk of losing their PI and license upon renewal. 

The next few months will be interesting to see whether or not the AI industry returns to the status quo.

For more information contact the Knight Frank Building Consultancy team.