EWS1 Professional Indemnity Insurance Scheme: Contingent Liability Update
(Limited Text - Ministerial Extracts only)
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The Parliamentary Under-Secretary of State for Housing, Communities and Local Government (Alex Norris)
In September 2022, the EWS1 professional indemnity insurance scheme launched for competent fire safety professionals undertaking EWS1 assessments—fire safety assessments for the external wall systems in residential buildings. The scheme aimed to enable competent professionals to access the indemnity cover they need to undertake external wall assessments.
On 27 June 2022, the Minister of State for Housing published a written ministerial statement notifying Parliament of an unlimited contingent liability, with the Government Actuary’s Department making a best estimate of expected losses of circa £100 million.
The scheme closed on 30 October 2023. Departmental research showed that assessors can access suitable insurance from the open market at a competitive premium and with a wider scope of coverage. The market has responded to the protection gap the Government were looking to address, which removes the requirement for the Government-backed scheme. Continuing with the scheme would no longer be a good use of public funds.
Government action has helped to get the market moving again and address this issue. The relevance of EWS1 forms is declining as wider Government interventions have taken effect that support lenders to reduce their reliance on EWS1 forms and instead use other forms of documentation to support mortgage lending decisions. The changes we have made have helped improve access to cover across the professional indemnity insurance market.
Policies sold under the scheme to date will continue to be insured under the original terms. Due to improving market conditions, fewer policies were sold than anticipated. The maximum possible loss from claims arising is £70 million. That may decline further, should policies be cancelled. The policies have a 15-year term, meaning that claims are possible until 2038. The risk is limited by the number of buildings, and number of EWS1 assessments. To further mitigate this risk, we only offered professional indemnity insurance cover for accredited professionals who have the requisite training, expertise and knowledge to undertake the EWS1 assessment. In addition, completed EWS1 assessments are subject to an audit process to ensure they are being completed in line with the British Standards Institution PAS 9980 methodology.
The Treasury approved the proposal to launch the scheme and have been informed of its closure. My Department will keep Parliament informed of any changes to this contingent liability on a regular basis.
A departmental minute will today be laid in Parliament, providing more detail on this contingent liability.
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