The hardening construction market has made it challenging for developers to find the right structural warranty policy at a palatable rate. 

As a result, it can be tempting to look at the unrated market or alternatives, such as professional consultant certificates. 

This series of articles covers the five main things developers should consider; the first focused on the limit of indemnity. This article will discuss the rating of insurers and the importance of working with providers with A-rated capacity. 

A structural warranty is designed to protect property owners against structural defects that occur in the 10 years after practical completion. 

One of the fundamentals that should not be compromised when purchasing a policy is that the underwriter will exist for the full term. We purchase insurance in the hope that we don’t have to use it, but have the peace of mind that it will protect us if we do.

While nobody can completely guarantee the solvency of any entity, these ratings evaluate and assess a company’s creditworthiness and offer comfort to its network that they are a reputable business.

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At J3 Advisory, we only work with structural warranty providers that have A-rated capacity. While there is no requirement for an insurer to be rated, it provides credibility to their operations. 

The cost implications of working with an A-rated provider

For every policy offered with A-rated insurers, there will always be unrated markets that will look to write a policy at a notably cheaper rate. However, many developers will remember the implications of working with CRL Management’s unrated carrier, Alpha Insurance A/S. This was both a time-consuming, costly and brand-damaging exercise for those who had placed their faith in CRL and then had to seek alternative cover.

Securing the most cost-effective terms is always high on a developers wish list when it comes to their latest warranty. And as with most purchases, there will always be someone who will do it cheaper. However, this is a risky move. There has been example after example of developers getting their fingers burnt by having ‘cost’ as their lead strategy when it comes this. 

Easing cashflow concerns 

Recognising the hardening construction market as the number one concern of most developers, J3 believes it is important to do what it can to help clients alleviate cashflow worries.

Therefore, while advising developers on obtaining the most appropriate policy, J3 has partnered with a leading funding house to allow developers to spread the cost of their warranty over the construction period with 0% deposit requirement. 

This allows developers to work with insurers with A-rated capacity, giving them the most appropriate protection, without jeopardising their short-term cashflow.