Construction Brief June 2025: Market insights

We briefly review some notable and significant developments currently impacting the industry. This includes a review of the Fire Safety Reinsurance Facility introduced in April 2024, the potential effects of the newly launched 10 Year Infrastructure Strategy on the construction market and thier insurers and a case summary of Makin v QBE insurance (Europe) Ltd.

One year On - the impact of the Fire Safety Reinsurance Facility

Following the Grenfell Tower tragedy, the UK Government implemented the Remediation Acceleration Plan to identify and rectify buildings with fire safety defects, whilst also supporting financially impacted leaseholders.

Through engagement with the building insurance industry, McGill and Partners (brokers), supported by the Association of British Insurers (ABI) and the British Insurance Brokers’ Association (BIBA), launched the Fire Safety Reinsurance Facility (the Facility) on 1 April 2024.  The Facility consists of five insurers, Allianz, Aviva, Axa, RSA and Zurich and is a commercial intervention tool aimed at protecting leaseholders of multi-occupancy residential buildings, with fire safety defects, from elevated insurance premiums during their remediation period.

The long-term objective for impacted leaseholders is to remediate buildings to a standard that protects both life and property. The Facility is an interim measure aimed at reducing insurance costs by promoting competition in the insurance market, and increasing capacity by spreading the risk within the insurance market to offer adequate cover.

One of the causes of inflated insurance costs has been single insurers taking on the significant risk of a building with fire safety issues resulting in insurance for fire-risk buildings typically being costly ‘layered’ insurance. The Facility enables insurers to solely cover (the majority of) a building as reinsurers will share the risk, ultimately reducing the number of insurers involved and their associated costs.

One year on from the implementation of the Facility, the ABI has praised the positive impact of the Facility, citing that over 680 buildings are entered into the Facility, with an insured sum of £14.9 billion. The Facility has enabled insurers to provide:

1. cover at a higher percentage
2. cover for buildings that were uninsured or covered at a higher premium or
3. improved terms by removing restrictions, such as limits or excesses.

Looking ahead, the UK Government is aware that further cooperation with insurers is needed to counteract elevated premiums, as not all insurance has seen a premium reduction within the Facility.  Whilst leaseholders can seek out adequate cover, the Facility does not guarantee protection against higher premiums. Further engagement between the Government and insurers has prompted the Government to consider additional measures to support leaseholders, including reducing fire-related liabilities to lower premiums and reducing insurance premium tax which could lower costs by 12%.

The Facility will remain in effect for the next two to four years as remediation works continue. It is hoped that the additional measures to support leaseholders, considered by the government, will be implemented. This will lead to more buildings and leaseholders supported through the Facility and accelerated pace of remediation.

Contact: Maneeka Sangha, Lourenzo Fernandez

10 year infrastructure strategy

The UK government’s newly launched 10-Year Infrastructure Strategy marks a pivotal moment for the legal and insurance sectors, signalling regulatory stability, long-term investment opportunities, and a coordinated national approach to infrastructure development. With more than £725 billion of public funding committed, the strategy aims to rebuild economic confidence through integrated investment in transport, clean energy, housing, digital connectivity, and social infrastructure.

Critically, the strategy outlines structural reforms intended to de-risk project delivery and enhance private sector involvement. It establishes the National Infrastructure and Service Transformation Authority (NISTA): a new central unit combining strategic oversight with delivery assurance across major public infrastructure projects. This body will advise ministers on project viability, assess delivery readiness, and maintain a public-facing Infrastructure pipeline, giving stakeholders a transparent view of national priorities.

For the insurance sector, particularly long-term institutional investors such as pension and life funds, the plan offers a more predictable regulatory environment and pipeline of investable projects. The government has committed to reviewing public-private partnership (PPP) models and unlocking private capital through regulatory reform and institutions such as the British Business Bank and the National Wealth Fund.

The response from the Association of British Insurers (ABI) underscores the significance of the strategy for financial services. The ABI has commented that the strategy “delivers a clear long-term growth vision, commitment to genuine partnership with business and the regulatory certainty firms need to thrive.”

The ABI welcomed the inclusion of financial services, including insurance and pensions, as a core growth sector in the Government’s modern industrial strategy. The ABI also strongly endorsed the £6.6billion capital expansion of the British Business Bank, which is expected to mobilise financing for SMEs and further broaden insurers’ investment horizons.

There are of course implications for the legal sector. The strategy proposes fast-tracking up to 150 major infrastructure planning decisions before the next election and introduces a spatial approach to planning that will likely impact environmental, land use, and public procurement law.

Looking forward, as the government prepares to publish sector-specific plans (including for financial services) and launches the Infrastructure Pipeline in July 2025, legal and insurance professionals will likely need to engage early to shape, support, and capitalise on the decade-long strategy.

Contact: Ozkan Ucak

Compensation denied: a cautionary tale from Makin v QBE Insurance (Europe) Ltd [11.04.25]

The High Court Judgment of ‘Makin’ highlights the strict and unforgiving nature of insurance notification clauses and their significant impact on indemnity obligations.

In August 2017, Mr Makin was forcibly ejected from a bar in Oldham by security personnel employed by Protect Security Ltd (“Protec”), where he was placed into a headlock which later precipitated a stroke and left him with severe neurological injuries. Proceedings were issued against the security firm, Protec, for negligence. The claim was defended by Protec until the day before trial when Protec appointed liquidators and failed to attend the trial. Despite their absence, the court found that Protec were vicariously liable for the actions of their door supervisors.

Following Protec’s liquidation, Protec’s Public Liability Insurers, QBE Insurance (Europe) Ltd (“QBE”), were joined to proceedings in accordance with S.1 of the Third Party (Rights Against Insurers) Act 2010.

QBE defended the claim on the basis that Protec had failed to comply with its claims notification obligations under the policy which required Protec to notify “as soon as practical but in any event within 30 days” of any incident or bodily injury which may give rise to a claim. Here, the Letter of Claim was issued in October 2019, with QBE being notified in July 2020. QBE argued that the clause was a condition precedent, allowing them to refuse indemnity to Protec for the claim.

While the court sympathised with Mr Makin’s situation, it upheld QBE’s position, finding that that claims notification clause was a condition precedent. As such, QBE were entitled to refuse indemnity to Protec, meaning QBE had no obligation to compensate Mr Makin for his injuries.

With construction firm insolvencies accounting for 15.7% of all insolvencies in England and Wales in April 2025,  it is likely that insurers will face more claims being pursued under the Third Parties (Rights Against Insurers) Act 2010 in the coming months or years.

The decision therefore serves a stark reminder to insurers of the clear drafting of unambiguous notifications provisions within policies. Moreover, insurers should carefully consider the strategic advantages of making claim notification clauses as condition precedent, reinforcing their ability to deny indemnity in cases of non-compliance.

With permission to appeal having been granted, the final word on this hard-hitting outcome may yet be spoken.

Contact: Beth Cownden