YOUR COMPLIANCE MATTERS – FCA Multi Occupancy Leasehold Insurance Rules effective 31.12.23

Further to our October Newsletter on this topic, we have drafted a format for you to adapt and implement, to assist you in providing the additional information to be disclosed to Residential Leaseholders in Multi-Occupancy properties, for cases incepting, or renewing, from 31.12.23 onwards.

The Policy Statement can be found at PS23/14: Multi-occupancy building insurance: Feedback to CP23/8 and final rules (fca.org.uk).

As a reminder, a ‘Leaseholder’ is a tenant within the meaning of section 30 of the Landlord and Tenant Act 1985 including a recognised tenants’ association. The Rules will also apply to a ‘policy stakeholder’, being any individual obliged to pay premium. For simplicity we have used the term ‘Leaseholder’ in the remainder of this newsletter.

To be clear, the Rules do not apply to Commercial Leaseholders.

Required disclosure.

You will need to provide additional information to Leaseholders, as soon as reasonably practical following conclusion of the contract.

This information can be sent to the Policyholder, or Property Managing Agent, with an instruction to distribute it to Leaseholders (or send direct to the Leaseholder if you are in touch with them). The FCA has not prescribed a format for the disclosures, but we would suggest something along the following lines. Please adapt to suit the specific circumstances of the case.

Words in italics are for your information and should be deleted from the outbound communication:

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Dear (Leaseholder)

Financial Conduct Authority Rules now require that we supply additional information to the occupants of Residential Multi-Occupancy properties, following Renewal (or inception) if the insurance cover for the building.

• We attach a summary of the features of the policy, including main benefits, coverage and exclusions of the policy, duration, and insured sum (produced by insurer).

• The policy premium for the building is £XXXX (Where the policy covers a portfolio of buildings, firms must disclose the premium at building or dwelling level this can be an estimate and is to be produced by insurer).

• Our Remuneration for arranging cover is £XXX (including contingent commission and potential profit share, please ensure that this the commission on the premium quoted above)

• XYZ will also receive £XXX (if any remuneration is paid to other parties including unregulated Property Managing Agents and freeholders. Delete if not applicable)

• Information about potential conflicts of interests, such as ownership links between the intermediary and the insurer (delete if not applicable).

• We have obtained quotes from a single insurer only OR We have obtained quotes from X insurers before selecting this insurer (the number of alternative quotes you have obtained with further details of these to be provided on request).

• We are happy that the insurer selected provides cover adequate to meet the insurance needs of both the freeholder and leaseholders.

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Further support

You will be expected to deal with queries, either from the Policyholder, or any Leaseholder, in a way which ensures ‘Good outcomes’ for all parties. So, if the Freeholder or PMA has failed to provide the required information, and you are asked for any of the information by a Leaseholder, you will be expected to respond to them.

Action Required

You will need to identify cases impacted by the new Rules, prepare appropriate disclosure processes and formats and be ready to field queries from Leaseholders.

As always, we are happy to discuss any issues arising.