Building Safety Act – shifting insurance and risk requirements

The provisions of the Building Safety Act 2022 were implemented in 2023 and 2024. Janet Penny, client manager – public sector at Aon, looks at how the new legislation has affected insurance and the risk management measures organisations should consider.

The Building Safety Act 2022 (BSA) creates a new safety and liability regime in England and Wales that aims to deliver safer buildings and greater protection for residents. But the new requirements are also creating issues and delays, with implications for insurance and risk management.

The new regulatory framework applies to all building work under the building regulations, with more stringent rules for 'higher-risk buildings' (HRBs). These are buildings that are at least 18m / seven storeys in height and contain two or more residential units.

The Building Safety Regulator (BSR) is responsible for overseeing the safety and standards of HRBs, with powers over design, construction and building management.

Tougher regulation and more oversight increase regulatory enforcement risk, including criminal liability, and feed directly into officials' indemnity, directors' & officers' (D&O) and professional indemnity / errors and omissions risk profiles. Where an organisation fails to comply with the legislation, it could be subject to unlimited fines.

These are some of the key areas – and how the insurance and risk requirements have shifted:

Dutyholder regime

The dutyholder regime applies to the design and construction of all works and buildings in England where building regulations approval is required. Dutyholders, which include the client, principal designer and principal contractor, are responsible for ensuring compliance and are criminally liable for any failures. The client has additional responsibilities, including checking the competence of other dutyholders, and documenting the process.

This will affect insurance arrangements, putting more emphasis on professional indemnity cover. It may also drive tighter warranties and indemnities in contracts and lead insurers to ask more questions on governance, competency frameworks and quality assurance processes.

Gateways and golden threads

The new regime introduced three critical checkpoints, known as gateways, in the building control process for HRBs. These are at planning stage (gateway 1); pre-construction (gateway 2); and pre-occupation (gateway 3).

The main issues come with gateway 2. Delays in the approval process mean it can take anything from a couple of months to more than a year to get the necessary paperwork. As well as potentially stalling construction, this can result in a significant loss of rent and alternative accommodation costs.

Further delays can be caused by the golden thread, a secure, digital record of safety-critical information starting at design phase and continuing throughout an HRB's lifecycle. There may be issues obtaining this, perhaps because it's an older property or there's a complicated ownership structure making construction detail difficult to locate.

Given the risk of delays to the building control process, organisations could consider extending indemnity periods on property policies. That aside however, insurers would relate a claim on a business interruption period to what is reasonable and not, for example, extensions due to building design matters.

It's possible that, over time, stronger documentation will reduce latent defect uncertainty and these delays will disappear. However, until then, insurers will look for evidence that the client has robust document management and governance in place and can meet its gateway and golden thread obligations.

Registration and reporting

The BSA requires owners to register occupied HRBs with the BSR and provide ongoing reporting. This includes safety case reports, to identify and control major fire and structural risks, and mandatory occurrence reporting of safety events and failures.

As failure to meet these requirements could trigger regulatory penalties and criminal proceedings, there are insurance implications. Perceived weak risk management could affect insurance terms, deductibles on multiple classes of cover and pricing.

However, where an owner can demonstrate a strong safety case regime and data trail, this can support favourable property and liability underwriting.

Fire and structural safety

As the BSA targets structural and fire safety, there are also amendments to the Regulatory Reform (Fire Safety) Order 2005 that must be considered. These include stronger duties on responsible persons; a requirement to use competent fire-risk assessors and the requirement to keep records and share fire-safety information with residents.

The breadth of the changes will affect property and liability risk engineering. One of the key underwriting focuses is the quality of the fire-risk assessment, with a shortage of competent fire-risk assessors already causing issues. Organisations can also expect more intrusive loss-control requirements from insurers, such as cladding remediation, compartmentation and evacuation strategies.

There is also a risk of non-compliance with the BSA and there are plenty of examples of claims on HRBs that could lead to issues. Examples include water damage to lower floors, where the stop tap was on the top floor of a high-rise block; the use of modern methods of construction, where damage to one unit results in others needing replacement or the contractor has gone out of business; and the cost of implementing a waking watch in a block of flats if a fire issue is identified.

Where there is evidence of non-compliance, it could raise denial-of-coverage and conditions precedent questions in some policies. Engage with your broker to check the intention of cover, the interpretation of your policy and how the lease links in with this.

Longer limitation periods

The BSA extends the limitation period for claims under the Defective Premises Act, from six years from completion of a dwelling to 30 years for dwellings completed before 28 June 2022 or 15 years for those completed after that date. This increases the risk of historic claims against developers and freeholders but also designers, contractors and product manufacturers.

It also creates knock-on effects for insurance. As well as a squeeze on PI capacity, insurers are applying coverage restrictions, such as higher deductibles or exclusions for cladding and fire safety. Organisations should ensure they check professional advisers have sufficient cover or, if not, note it as a liability in their risk register.

The extension has also led to disputes over policy triggers and retroactive dates, especially for historic projects and increased the relevance of warranties and indemnities insurance in transactions involving affected assets.

Resident engagement

Under the BSA, owners and managers of HRBs must engage with residents and have formal routes in place to enable them to raise any safety concerns. If residents aren't satisfied with the response they receive, they can escalate the concern to the BSR.

The potential for more visible complaints and regulatory escalation increases the risk of media exposure and group actions by residents. In turn this could cause significant reputational damage. This may lead to insurers factoring in the quality of resident communication, complaints handling and transparency into terms and pricing.

Adopting any new legislation invariably creates pain points and, given the ambition and breadth of the BSA, the issues facing the market are not unexpected.

Some of these pain points are likely to be temporary, for instance the shortage of competent fire-risk assessors and data and system readiness, but they are creating uncertainty in the insurance market.

Organisations can expect more detailed questionnaires and risk-engineering pre-conditions as well as ongoing tightness across professional indemnity and construction-related covers, especially where buildings have combustible cladding or there are unresolved safety defects.

Once the legislation is fully bedded in – and all organisations have caught up with their data and systems requirements – insurance and risk conditions should relax too. In the meantime, it's important to stay on top of any issues that arise with existing cover and discuss them with your broker.

More information

For more information or to discuss any issues around the Building Safety Act, speak to your Aon account manager or contact Janet Penny at [email protected].

About Aon

Aon plc (NYSE: AON) exists to shape decisions for the better — to protect and enrich the lives of people around the world. Through actionable analytic insight, globally integrated Risk Capital and Human Capital expertise, and locally relevant solutions, our colleagues in over 120 countries provide our clients with the clarity and confidence to make better risk and people decisions that protect and grow their businesses.

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information and use sources that we consider to be reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

This article has been compiled using information available to us up to 01/06/2026.

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