Griffiths & Armour Professional Indemnity
Insurance Schemes


In many aspects of our lives, 2020 has seen a decade’s worth of change compressed into a few short months. The societal, economic and technological changes that have taken place since March due to Covid-19 are profound.
The Professional Indemnity (PI) insurance market too has been undergoing significant change, most of which has little to do with the impact of Covid-19. Prior to the pandemic taking hold, we predicted that 2020 would be a potentially difficult year for PI insurance and that has proven to be the case. The systemic problems of premium vs claims costs; the increasing incidence of large catastrophic claims and their impact on profitability; and the exodus of insurer capital from the PI market were predicted as was the likelihood of those problems giving rise to difficulty.
Add in the spectre of Grenfell and the insurance market’s continuing concern about the information arising from the inquiry and we have a mix of underlying structural problems and a catalyst for some quite significant market change for the construction professions.
All these issues have featured prominently in the discussions with our insurance partners over the renewal of our Professional Indemnity insurance facilities, an event that occurs each November. We report to each of you in the section titledRenewal of our Scheme facilitiesbelow on the detail of the outcome of those discussions.
For now, we are able to reassure clients that our facilities have been renewed, albeit that renewal has been secured through the most difficult negotiation we have had for a generation. There are some necessary and unavoidable changes too, relating to the cover we can arrange for fire safety work and the completion of the EWS1 form. There are also significant implications for the price that will likely be proposed for your PI insurance next year and potentially beyond.
Whatever the future, your support team here at G&A look forward to some form of normality returning to business in 2021 and the chance to meet you all again over a coffee, rather than being restricted to a monitor and a video call.
In the meantime, if you have any questions at all with regard to the advice contained in the update, your PI broker or main point of contact at Griffiths & Armour will be happy to talk you through those in the normal way on a telephone or video call. Please get in touch if you would like to schedule some time over the coming days for that or would prefer to defer the discussion to align with the timetable for the renewal of your own arrangements.
Yours sincerely,
Griffiths & Armour Professional Risks

Renewal of our Scheme facilities

Considering conditions within the PI insurance market, we are particularly pleased to have secured insurers’ ongoing support for our Scheme facilities, which were renewed on 1st November 2020. This is a different exercise from the renewal of your individual policies; it is essentially the renewal of the overall framework within which your individual policies are placed throughout the coming year.

Like most things in 2020, the renewal of our Schemes has not been achieved without both considerable difficulty and a degree of change.  The negotiations we have had on behalf of our family of clients were without doubt the most intense and detailed in living memory.  That arose because of two key factors:

  • The continuing deterioration in the PI insurance market which, as we have regularly commented on over the last 18 months, is in a phase of marked and perhaps transformational change; and
  • Our steadfast refusal to accept disproportionate coverage restrictions.

We doubt it will surprise anyone that arriving at a suitable framework for the forthcoming year has required significant compromise on both sides.  As with any long-term relationship, those compromises have been balanced so that each party can commit to going forward on terms which, having regard to the world around us, are acceptable and indeed compared to the alternative, attractive.

However, we don’t shy away from the fact that our community of clients will face significant challenges ahead. And our insurance partners equally so.

It is because of the commitment shown over the last 70 or so years, by both our clients and our key insurance partners, that we have successfully secured ongoing support for our facilities at a time when all insurers are looking to severely restrict the cover they will offer, the areas of work they will underwrite and the volume of business that they will consider taking on.  That is of course if they are still involved in underwriting PI insurance in the first place.  Many are not.

That ongoing support from our insurance partners has been achieved on the condition that significant underwriting action will be taken in two key areas:

  • restricting coverage for fire safety matters and in particular the EWS1 form; and
  • cost, in terms of both premium and excess.

We explore the key factors influencing these two areas below.

Before that, and particularly for those who have missed some of our other publications over the last year or so warning of trouble ahead, it is perhaps timely to begin at the beginning and explain why this Scheme renewal has been the most challenging in a generation.

The PI insurance market – context and recent guidance

As you will be aware from previous communications, the PI market is currently suffering from a severe shortage of capacity; indeed, many industry commentators have talked of a looming ‘capacity crisis’.  At a very basic level, there simply isn’t enough capacity within the insurance market to deal with the level of demand; whether that is the number of firms seeking PI insurance or the amount of cover they are looking to hold.

In late 2019, we produced a paper ‘The Supermarket Revisited’.  The introduction was –

2019 … What lies ahead and beyond?

Anyone involved in the business of arranging PI insurance will recognise that the market has been subject to too much downward pressure for too long.

Whichever features of the PI landscape you consider important, the pressures have been there. Pressure to reduce pricing. Pressure to broaden coverage. Pressure to reduce excesses. And as with any spring under too much compression, at some point that downward pressure is released and the spring snaps back. How far and how fast depends on the composition of the spring and the downward force applied. Apply the analogy to the insurance market and the results are fairly similar.

The insurers that have contrived to put themselves under the greatest pressure, by cutting rates too far for example, will react more quickly and more severely than those who have tread a more moderate path. Recent entrants to the PI market are realising all-too-quickly that not all springs snap back to their natural state.

Some simply break. In insurance market terms, this is manifested in insurer withdrawal from the market, a phenomenon not seen in construction PI for 10 years or more…’

Since then the predicted withdrawal of insurers from the PI market has accelerated, resulting in a market today which is severely short of insurer capital.  Put another way, there are not many insurers left. The spring has been fully released and for some it has indeed broken.

Weekly we are encountering firms that have been unable to source insurance protection, are struggling to achieve the indemnity limits they previously held or are facing PI premium increases of several hundred percent.

The insurers who remain in this sector are largely free to pick who they choose to work with and on what terms. Those that have tried to take that ‘moderate path’ and continue to secure market support face a number of dilemmas:

  • There is a need to boost the premium pot available to meet the ever-increasing claims burden that the insurance market has to bear. But it cannot be right to indiscriminately triple or quadruple premiums as some markets have done.
  • There is a need to recognise the potentially catastrophic impact of ‘fire safety’ claims on the PI market and protect insurers from their worst fears of insolvency. But it cannot be right to simply exclude all cover for this activity as many have done.
  • There is a need to tread the potentially difficult journey ahead with caution, delicate balance and foresight. That considered approach is one that we recommend – and we hope you agree that is what we have done.

As custodians of the safe haven that many of our clients have relied upon for decades, we can’t shrink from warning again of the troubles ahead and this document is part of a series of publications that we’ll be issuing over the next few months covering the market changes we can expect through 2021 and beyond.

The forthcoming changes

In most areas, the policy cover remains largely unchanged but in line with a fundamental shift in the market, there are some material and significant changes in the cover afforded for fire safety risks and the completion of EWS1 forms. To understand the impact of those changes and the underlying market conditions crystallising those changes, we would strongly recommend that you read through the remaining sections of this guidance note.

Fire Safety and EWS1 forms – upcoming coverage restrictions

It is important to say that the difficulties being experienced in the PI market are not restricted to the UK.  Many of the challenges are global but there are concerns that are particular to the local market and perhaps none more so than the spectre of fire safety, an area some insurers now regard as uninsurable from a liability perspective.

Whilst the approach being adopted on our facilities is seen as reasonable and proportionate, the majority of our clients will see cover for ‘Fire Safety Notifications’ moving to an aggregate, costs inclusive basis with the uninsured excess applicable to costs.

We also need to alert you to the fact that a blanket exclusion will be applied to each of your policies at renewal with the effect that any liability arising from completion of the EWS1 form (or any revision to it) completed after the 1st December 2020 will be excluded. It is therefore critical that if you are involved in the EWS1 process of certifying buildings, that you can make contact with your usual G&A account handler. We warned of the issues arising from EWS1 in August and there is no doubt that insurer’s positioning on the form has hardened significantly over the months since that note was released.

More detail on each of the above issues is provided below.

As advocates for our clients’ interests, we are actively engaged with Government, the institutions and various industry forums asking for support in this area.  Whilst we do not believe that the PI insurance market is broken, it is clearly under considerable stress arising from insurers’ belief that a bow-wave of claims is fast approaching to inundate them.  Any help that Government may provide in this area will take time, but we are pleased to be involved in discussions and gratified that our messages are being heard.

Government action alone will not be a panacea and it is probably not desirable for anyone involved in this area were it to be so.  It needs to go lockstep with fundamental changes in the environment for construction consultants. There needs to be an end to dumping risk on the parties least able to fund it and least responsible for it.  Those arguments are undoubtedly critical but are, however, for another moment.

Unless and until there is Government support in this area, the commercial insurance market has been left to its own devices which has given rise to a significant spectrum of responses.  We are seeing restrictions being introduced but to date, there is no ‘market standard’ approach as such; some insurers simply avoid risks that have exposure to multi-unit developments, others will look to restrict cover to aggregate and some will apply inner limits etc. An increasing number will not underwrite ‘fire safety’ cover at any price. The insurers who take that last view are far from being on the ‘fringe’.

There will be some insurers who may continue to provide cover on an ‘each and every claim’ basis, but that would tend to be under an ‘off the shelf’ policy wording that would not provide sufficient protection in other areas, such as for liability assumed under contract. There are clear concerns around the long-term viability of such products too.  It is our view that policies which continue to offer this cover ought to be viewed with caution and some concern as to their likely availability in the medium term.

In assessing the Scheme position on cover for fire safety risks, we need therefore to do so in the context of the conditions that prevail within the PI Insurance market generally. Our Scheme is not immune from what is happening in the wider market and the difficulty we have faced in resisting insurers efforts to introduce some restriction is that without conceding some ground we are all but certain to lose their support altogether.  It is not a hyperbole to suggest that without some sort of action in this area, our Scheme for construction consultants would not have renewed.

Of course, our Schemes are more than just about measuring the extent to which we can insure fire safety. That is a critical factor and something bordering on a ‘public good’ given the support it gives to those remediating dangerous buildings. But any effective PI policy is about more than the cover afforded for fire safety.  It is a question of trying to achieve the right balance between a number of factors, including:

  • The ability of the insurer to pay claims and their longer-term commitment to this class of business.
  • The breadth of cover afforded under the policy wording for everything else.
  • The premium charged.
  • The cover provided for fire safety risks and how that stacks up when measured against perceived or actual exposures of any individual client.
  • For us, there is the additional factor of the insurer’s willingness to sign up to our unique service proposition, that has proven to reliably support our clients for 70 years.

With this holistic view in mind, we need to turn to what the future looks like in this area.  From 1st November, the position on our Scheme facilities will change and the cover generally available as follows:

– Most clients’ covers will be restricted to provide a single aggregate, costs inclusive limit of indemnity in respect of ‘Fire Safety Notifications’. This means that any losses or costs directly or indirectly relating to:

  • the combustibility or fire performance of cladding or roofing systems;
  • any internal fire protection systems; and
  • any aspect of the fire safety or fire performance of a building or structure will benefit from a single aggregate limit of indemnity only with the uninsured excess applying to costs.

– For those clients who have inner limits of indemnity, special excess provisions or outright exclusions, those will remain, but any ‘bespoke’ wording will generally be no wider than that outlined above.

This represents a significant but necessary shift in approach to deliver a policy specification which most of our insurance partners can support, whilst providing clients with cover that matches or exceeds what is generally available in the market.  In delivering this, we are sorry to have lost several of our insurance partners because of their inability to support this refined extent of cover, but we certainly don’t apologise for securing cover that allows our clients to be able to continue to work in these areas. The test for us is whether the approach being adopted by insurers is reasonable and proportionate. One which enables insurers to protect their position to some degree across their business, whilst still providing significant protection in this area and preserving the other crucial aspects of cover.

The cover we provide in every other respect is largely unchanged from previous years – indeed there are several minor improvements to it –  and the fact that we can continue to deliver a wide ‘legal liability’ policy with few exclusions of contractual liability is testament to everyone involved in the process.

We wrote at some length in August about the problems with the EWS1 process and warned of the significant changes in the market and PI insurers dim view of the liabilities it imposes.  Our advice was that given the high degree of uncertainty regarding the market’s reaction, clients should not sign the form under any circumstances.  For those of you who missed that publication, we would urge you to read it here.

The intervening months have done nothing to change insurers’ views on the dangers they see in the risks that might be inadvertently assumed by their clients and ultimately themselves.  There is a general market-wide shift towards excluding all liability attached to the EWS1 form or similar forms.

The fact that insurers have taken this action in respect of a single form speaks volumes. We do not believe that there has ever been a market move to exclude a specific document from PI cover in the hundred or so years that construction PI has existed as a class of business.


  • In respect of any EWS1 form signed after the 1st December 2020, our Scheme policies will exclude insurer’s liability for all claims arising from the completion of EWS1 (or any revision to it) unless this has been specifically agreed with insurers.
  • In respect of any EWS1 form (whenever it was signed), our Scheme policies will exclude any liability arising under EWS1 (or any revision) that imposes a greater or longer lasting benefit than the standard form published by the Building Societies Association, RICS and UK Finance.

We believe there are ways in which certification can be made whilst maintaining insurer support and have made representations to various regulatory and Government parties as to how that might be done. Sadly, this is still an area which is ripe for clarification and we continue to work to arrive at a position which allows critical fire safety work to be undertaken, whilst preserving the insurance market’s support for the potential liabilities that flow from that work.  Failing that, there are more radical options and we continue to advise as to the shape and structure of those potential external solutions.

For now, it is absolutely critical that you do not sign EWS1 or any revision, or any similar document without first speaking to your regular G&A contact.

Budgeting for increased premium

2021 will see further increases in premium. Whilst the impact on any individual client will to some extent depend upon the specific profile of that firm, insurers are already signalling their intentions for a step-change in pricing and we offer some advice on appropriate next steps taken from our Brave New World publication, but just as applicable to G&A clients.

In September we issued our Report ‘The Claims Context’, which reviews the ten highest value settlements concluded under our construction facilities during the calendar year 2019. It considers one significant tier of settlements, to which we need to overlay the attritional effects of the many further tiers of claims that sit beneath and are a significant factor in themselves.

Each claim tells a different story and helps to illustrate that whilst some claims grow out of a toxic mix of coexistent factors, other high value claims can be traced back to a single innocuous event which was sufficient to cause a major problem. The conclusion is that the largest claims are becoming larger and attritional claims are not reducing in volume.

This is reinforcing a view held for 10 years or more that premium levels have fallen to a level which are inadequate to offer a realistic prospect of underwriting profit and additional correction is now urgently required.

This sits within a context where wider market analysts are suggesting price increases between 50% and 100% as being a realistic assessment for 2021.

For clients renewing under our Scheme facilities, it will still be the case that individual renewals will turn on their individual circumstances.  That being said, we would suggest that budgeting for potential increases of 50% would not be an unreasonable starting point.

The reasons ‘why we are where we are’ could easily swallow up this entire communication, so please forgive our providing a significantly abridged version.  If you want to read about the market context in more detail, please click here for ‘The Supermarket Revisited’ or here for extracts from our ‘A Brave New World: The Claims Context’ publication.

We will be issuing further guidance and context on all of these issues in the forthcoming months.  For now, however, we leave you with the concluding 5-point plan from a chapter in our ‘A Brave New World’ series on steps to take now to deal with the problems ahead:

1. Plan Early
Start – and expect to be prompted to start – discussions early. In 2021, time will be an asset not a luxury as renewals are going to take longer to conduct and to finalise than at any other point in the last two decades. Even ‘straightforward’ smaller and medium sized risks (say with fees under £1m and undertaking ‘plain vanilla’ activity) should expect to be engaging with their broker at least two months ahead of renewal. For complex risks buying large limits, unusual risks, or firms impacted by claims, more time will be required. Meaningful engagement can be required six months or more ahead of renewal date.

2. Expect greater information requirements
Insurers are demanding more data to provide renewal terms. If you are undertaking any ‘higher risk’ work, then they will have further questions and perhaps separate forms. Higher risk is an ill-defined phrase, but if we were to come up with a list of the usual suspects this includes:

  • Basements
  • Façade engineering
  • Any involvement in cladding
  • Any risk with pollution exposures
  • Any work involving surveying or valuation of residential or commercial property
  • Asbestos
  • Swimming pools
  • Stadia
  • Any large or complex projects, particularly where this is out of your normal scope.

Importantly, don’t regard it as necessarily a bad thing that you’re providing substantial detail to describe these activities. Insurers will (unless told otherwise) think the worst, so if all they know is that you undertake basements, they will infer that these are the multi-storey kind built in the leafier parts of London. If we can demonstrate otherwise, this can unlock significant underwriting differentials, and even discounts by properly explaining what it is you do – or don’t do.

3. Understand your contract risk
Contract risk management is always a topic of interest and insurers will ask how you go about selling your services. Do you use your own standard forms or those of the institutions (ACE, RIBA, RICS etc.)? If bespoke contracts are used (and we all know they are the overwhelming majority) what do you do about contract vetting them for acceptability? Is your broker involved? Do you routinely include appropriate limitations and exclusions? Increasingly importantly, can you provide any statistics to support any of this?

4. Be prepared
If you’ve had claims, a post-claim review may be recommended and/or required and, indeed, it could be beneficial to draw insurers’ attention to the particular characteristics of the claim and the remedial measures taken to prevent them occurring again.

5. Present yourself properly
We firmly believe that your broker should be helping you understand the particular risks that your business will be perceived to present to the market and help you to construct a narrative around why those risks have been identified, understood and mitigated. Do not underestimate the value of such a written narrative or indeed a general overview of the way in which your business operates. If you can tell a good story about how you run your business, you need to make sure that your insurer hears it. At the end of the day, costs are going up, so the more preparation and detail you can put into understanding insurers’ concerns and, more importantly, addressing those concerns, the better.

We appreciate that there is a significant amount to digest. With that in mind, we plan and expect to be in detailed contact with our clients in the weeks and months ahead. In the lead up to your renewal we will discuss the appropriate approach and strategy for your business. In many ways, that is the most significant component in this communication: that we have secured the framework necessary to commit to you that we can continue to offer the proven and trusted specification to which you have become accustomed.

In the meantime, if there is any aspect of this note that you would like to discuss, please get in touch with your usual Griffiths & Armour client or click below to submit your enquiry.