Why careful provider selection makes a material difference
In construction and real estate development, insurance is often viewed as a necessary component of the process rather than a strategic one. However, the structure and adequacy of cover can have a meaningful impact on a project’s resilience, long-term value, and marketability.
At LBB, we regularly support clients in reviewing and refining their insurance arrangements to ensure they remain aligned with the true scale and nature of their developments. One area that consistently benefits from careful consideration is underinsurance—not as a failure, but as an opportunity to improve certainty and protect outcomes.
Why underinsurance can arise
Underinsurance most commonly occurs when policy limits, while seemingly substantial, are not directly linked to realistic reinstatement costs or the full lifespan of a project’s exposure. This is particularly true on large or complex schemes, where headline limits can appear appropriate at first glance but may not fully reflect actual build values or future claims scenarios.
We often identify this when reviewing quotes for experienced developers who have done everything right procedurally yet have not been given the clarity needed to make a truly informed comparison.
For example, a £100 million scheme can be quoted latent defects insurance capped at a fraction of the build cost. While the premium appears competitive, the limit represents only a fraction of the reinstatement value.
In the event of a large claim, it may be brought before a court that, despite options being available, an inadequate one was chosen based on a lack of understanding, perceived cost savings or a reticence to widen the scope.
It is incumbent on developers, with the help of an expert broker, to assess the full range of quote options on offer, paying particular attention to where a cost saving at face value may result in cover that is ultimately unsuitable and may end up leaving homeowners vulnerable.
A changing insurance and regulatory landscape
The construction insurance market has evolved significantly in recent years. Build cost inflation, more complex remediation expectations, and longer liability periods have all influenced how insurers now assess and respond to risk.
Many providers have moved towards full reinstatement cover rather than capped limits, reflecting the reality that remediation costs can escalate quickly, particularly where regulatory compliance and occupant safety are involved. Legislative changes, including extended claim periods under the Building Safety Act, have also increased the importance of ensuring that cover remains appropriate not just at completion, but over the full duration of ownership.
From a commercial perspective, this matters not only for claims resilience, but also for funding, investment, and exit planning. We routinely see lenders and institutional investors take a close interest in warranty structures, limits, and indexation—viewing them as a proxy for overall risk management.
What good looks like in practice
Ensuring adequate cover does not necessarily mean choosing the most expensive option. It means understanding:
- How policy limits compare to realistic reinstatement values
- Whether indexation is included to protect against future cost inflation
- How claims affect remaining cover over the policy period
- Whether the chosen structure is likely to meet funder and investor expectations
At LBB, we support this process through detailed, side-by-side comparisons of insurer terms. These clearly set out limits, pricing, breadth of cover, and any constraints, allowing clients to see the practical implications of each option and document their decision-making with confidence.
The role of the right broker and insurer
The difference between simply placing insurance and genuinely adding value often comes down to challenge and collaboration. As a specialist brokerage, we work closely with all leading latent defects insurers, not only to secure competitive terms, but to ensure clarity, consistency, and suitability of cover.
Our relationships with insurers are built on long-term engagement and shared standards. This allows us to provide clients with early insight into market appetite, evolving policy structures, and best practice—helping to avoid misalignment between expectation and reality.
A balanced approach to protection
Underinsurance is best addressed early, through informed discussion rather than reactive correction. In most cases, modest adjustments at the outset can materially improve protection, strengthen lender confidence, and reduce uncertainty over a project’s lifetime.
At LBB, our focus is on helping clients select cover that genuinely reflects their exposure and objectives—supporting sustainable development, asset value, and long-term peace of mind.
