2 June 2025
Latent Defects Insurance and Sustainable Building Practices: Exploring Insurers' Appetite for Eco-Friendly Developments
As the construction industry continues to evolve with a stronger focus on sustainability, the need for comprehensive insurance coverage becomes even more crucial. Following up on the introduction to Latent Defects Insurance (LDI) in the first article of this series, this second article explores how insurers are responding to the growing demand for greener, more sustainable building practices. From refurbishment projects to the use of structural timber, recycled steel, and green roofs, this piece examines how LDI is adapting to support these eco-friendly innovations and reduce carbon emissions in the built environment.
Refurbishments
Historically, LDI has largely been available only for new builds. However, in recent years, insurers have shown greater acceptance of refurbishment projects. This shift is partly due to the increasing number of refurbishments compared to new builds and the growing trend towards reducing carbon emissions in the built environment.
The insurability of refurbishment projects for LDI insurers will depend heavily on several factors, including the value of new works versus retained structures, the age and condition of the building, and the extent of structural work required.
LDI cover for the original retained structure is typically available only for projects that involve significant structural alterations, not for internal or non-structural fit-outs. Covering existing structures built in the 1980s and onwards will be more within the appetite of insurers.
Historically, LDI has largely been available only for new builds. However, in recent years, insurers have shown greater acceptance of refurbishment projects.
Structural timber
Insurers will focus on the level of dependency, which will be taken from the timber, in terms of loads through the structure, and whether the design is sufficiently robust. Developers need to demonstrate how the timber does not reduce the structural integrity and stability of the building, and should engage contractors who are highly experienced with timber.
For mass timber developments above five storeys (and certainly over ten) securing LDI could be very challenging and highly risk-dependent. For hybrids, e.g. traditional (steel/concrete) core and frame with cross-laminated timber (CLT) slabs, insurers are able to insure taller buildings. This is dependent on the level of timber vs traditional materials, but they can potentially be as tall as a traditionally constructed building.
A thorough water management plan that includes sufficient temporary weatherproofing is essential.
Re-used/recycled steel
For recycled steel, insurers need details on the experience of the demolition contractor, storage of the steel, quality checks and controls, alongside details of the age, condition, and previous use.
There can be a preference for reused steel, i.e. steel coming from the same site/building and for the steel to feature more in the secondary load bearing elements, i.e. not supporting the heaviest loaded columns.
Blue roofs
Due to the higher risk of water ingress, insurers rely heavily on good workmanship and design for blue roofs. Risk mitigation will occur through pre-audits at the quote stage and technical inspections during construction.
As with living walls, insurers may require manufacturer guarantees to reduce risks.
Green / zero carbon concrete
Cement-free concrete is challenging due to the prototypical and unproven nature. There is no loss history and claims data for cement-free concrete for insurers to rely on and base their underwriting upon.
Low carbon concrete can be acceptable, but insurers need to see the concrete specification and concrete mix design to consider. Insurers want to see precedent/example cases with demonstrable experience from the contractor and professional team.
Green / living walls
Insurers are reliant on good and suitable workmanship and design, but in addition, they would look to mitigate any risks during the pre-audits at the quote stage and then during the technical inspections once construction has started.
Insurers may require guarantees from manufacturers to further reduce risks.
Looking ahead
If you missed our first article in this series - Protecting Your Investment: Understanding Latent Defects Insurance for Building Projects, which delved into the essential principles of Latent Defects Insurance (LDI) and how it protects long-term project investments, be sure to give it a read for a foundational understanding of this critical coverage.
In the final article of this series, we will explore Housing Warranties and Hybrid Latent Defects Insurance in the United Kingdom, looking at the evolving insurance options for residential developments and how hybrid models offer additional security for developers and owners.
The Gallagher Specialty Construction team has decades of experience in arranging and servicing LDI policies across a range of sectors, including commercial, mixed-use, and residential developments. For more details on how Latent Defects Insurance (LDI) can benefit your building projects or if there are any questions about coverage options, feel free to reach out.
Understanding Latent Defects Insurance for Building Projects
For owners and developers involved in large-scale building projects, Latent Defects Insurance (LDI) provides an essential layer of protection against unforeseen issues that may arise after construction.
Hybrid Latent Defects Insurance and Housing Warranties
Building on our previous discussions about Latent Defects Insurance (LDI) and sustainable development, this final article in the series explores the evolving landscape of Housing Warranties and Hybrid Latent Defects Insurance in the UK.
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