The financial services regulator has been requested to review the buildings insurance market for blocks of flats.
In a letter to the regulator, housing minister Micheal Gove said he was “extremely concerned” to hear from leaseholders about their experience of “rapidly escalating” insurance premiums on high and medium-rise blocks.
There have been cases where insurance premiums have shot up more than 100 per cent year-on-year, Gove told the Financial Conduct Authority (FCA).
It comes as the government recently unveiled new measures to tackle the building safety crisis, four years on from the Grenfell Tower disaster when 72 people lost their lives in a fire.
The insurance market was “failing some leaseholders,” Gove added.
The letter requested that the FCA, in close consultation with the Competition and Markets Authority, review the sector and “make practical recommendations” in pursuit of “widely available and affordable cover.”
The authorities were asked to probe in order to “shed light on the underlying causes of year-on-year price increases.”
A review is to also “assess the causes of the marked restriction in coverage available for multiple-occupancy buildings,” Gove said.
Although progress was being made to remediate cladding safety defects in blocks across the country, Gove said premiums had accelerated “for almost all leaseholders in blocks of flats.”
Many insurers were reportedly unwilling to offer new policies, resulting in “a more limited market place with more restrictive terms or less coverage,” the minister said.
There was a lack of useful data to explain the rationale behind the increases, Gove said. He demanded “urgent advice on the scale and potential causes of the problem and what can be done to rectify these issues.”
The minister demanded “initial feedback” within three months, with a final report to be produced within six months, given the financial pressure on leaseholders.
In a statement, the FCA said: “Although insurance premiums are just one aspect of the rising costs faced by residential leaseholders in the wake of the Grenfell tragedy, we want to ensure products provide fair value and premiums fairly and accurately reflect risk.”
The authority has written to the chief executives of insurance firms and brokers today, to ask what actions can be taken to help leaseholders.
It said it wanted to collect data to “better understand the impact fire hazards and other factors are having on prices.”
“Where we see insurers, brokers, or regulated property managers not fulfilling their regulatory responsibilities we will use our powers to intervene,” the letter stated.
The FCA has also responded to the department for levelling up, housing and communities. “We recognise it is imperative that the market is able to continue to serve these consumers and further work is needed to assess the cause of any restriction in coverage available for multi- occupancy buildings,” a second letter said.
Insurer trade body the Association of British Insurers (ABI) said would do all it could to assist the FCA review.
James Dalton, ABI director general insurance policy, said: “Insurers recognise and sympathise with the challenges leaseholders are facing in terms of the increased cost of buildings insurance and have been working with the Government and FCA to identify options to assist leaseholders until the necessary remediation work has been completed.
“The cost of buildings insurance reflects the significant fire risks associated with many multiple-occupancy residential buildings, which go beyond cladding under a building control system that has been found to be “not fit for purpose”.