The study, by insurance expert Roger Flaxman, called for the government to offer its own indemnity scheme to private companies in the wake of the Grenfell Tower fire.
Earlier this year the AJ spoke to a number of practices that had faced difficulties renewing professional indemnity cover for potential claims in the event of a costly error on a project.
For the new study, commissioned by the Wren Insurance Association, Flaxman spoke to insurers, brokers and architects to build a picture of the future of the market.
He concluded: ‘It is reasonable to assume that, if no perceptible change is made by the industry or by government in controlling the standards of building control and the moral hazards directly associated with cost-driven tendering, then the professional indemnity insurance market may eventually be obliged to withdraw its support for the professionals involved in it.’
Flaxman said the Grenfell Inquiry and the Hackitt Report – both of which followed the blaze that killed 72 people in a tower block in west London in 2017 – had exposed ‘physical hazards and cultural risks’ in the construction industry.
‘The impact of the Grenfell fire has caused the insurance industry to be more acutely aware of the implications of continuing to offer insurance in an environment that is criticised by the Grenfell Inquiry and the Hackitt Report,’ he said.
‘Insurers are now highly regulated as to what risks they accept and they cannot turn a blind eye to the implications for the liabilities of professionals in the light of the Grenfell Inquiry and its outcomes in the world of construction.’
Flaxman said the current pandemic would also work against architects looking to secure professional indemnity cover.
‘The effects on the insurance industry of the Covid-19 episode will divert underwriters from focusing on construction related insurances as a priority,’ he warned.
‘It could now be appropriate for government to offer an indemnity scheme to relieve the private sector of responsibility for loss by fire of property that cannot be rectified to the modern minimum standards,’ added the report.
Ali Mangera, director of Mangera Yvars Architects, echoed Flaxman’s call for the government to indemnify practices whose ‘historical work […] complied with regulations at the time’.
He added: ‘Insurers should also separately consider public indemnity insurance for the many practices that are not or have never been involved in work such as Grenfell Tower, so that at least this segment of the profession can have [cover] at more reasonable levels.’
Leeds-based architect Mark Hide said sole practitioners and small practices were most vulnerable to withdrawals and exclusions from the indemnity insurance market as individuals could be personally liable for uninsured claims.
He said: ‘We have no commercial weight in the market as, although the premiums are large for us, they are insignificant for brokers and underwriters.
‘I fear that it will only be when the situation becomes a full crisis that any action will be taken – and by then it will be too late.’
The Architects Code, which lays down theArchitects Registration Board’s standards of professional practice, states that all practising architects are expected to have ‘adequate and appropriate’ professional indemnity insurance cover.
The ARB this year clarified that architects should write to it if insurance was not available to them, and said any architect who had acted responsibly but had elements of their insurance removed ‘through no fault of their own’ would not face regulatory action as a result.
A spokesperson for the Association of British Insurers said: ‘We recognise the difficulty that some building and construction professionals, including architects, are experiencing in accessing appropriate and affordable professional indemnity insurance cover for fire safety work.
‘The industry has been clear that in the long term there needs to be fundamental reform of building regulations to provide clarity on roles and responsibilities of those involved. Until this occurs, we will work closely with the government, the RIBA and others to understand concerns and discuss whether there are any alternative solutions for the short term.’