Quick Answers
Who arranges block insurance in an RTM-managed building?
The RTM company — as the party with management obligations under the lease. The premium is recovered through the service charge. RTM directors carry the obligation to arrange adequate cover and to do so at reasonable cost.
Why are premiums rising so sharply?
Three main forces: construction cost inflation pushing up reinstatement values, increased climate-related claims (flooding, subsidence), and post-Grenfell fire risk reassessment reducing insurer appetite for residential blocks with any cladding concerns.
Can leaseholders challenge the insurance premium?
Yes. The premium is part of the service charge and must be reasonable. Leaseholders now have enhanced rights to see the policy and commission details under the Leasehold and Freehold Reform Act 2024, and can apply to the Tribunal if they consider costs excessive.
The short answer: Block insurance premiums for residential blocks of flats have increased significantly since 2021, driven by a combination of macro-level market forces and property-specific risk factors. RTM directors have a legal duty to arrange buildings insurance to full reinstatement value — and an obligation to ensure the cost is reasonable and the arrangements are transparent to leaseholders.
What RTM directors need to focus on: ensuring reinstatement values are up to date (the most common and costliest oversight), understanding what commission arrangements exist on the policy, and retendering the insurance every two to three years rather than auto-renewing. The premium is a service charge item — if it is not justifiable, leaseholders can and will challenge it.
Key Takeaways
RTM directors are personally responsible for ensuring adequate cover
The RTM company's obligation to insure the building is set by the lease — and directors of the company are responsible for discharging that obligation. Underinsurance is not just a financial problem; it is a compliance failure that exposes directors to leaseholder claims.
Reinstatement value and market value are entirely different figures
Block insurance is based on the cost of rebuilding the structure — not its sale value. Many blocks are significantly underinsured because reinstatement values have not kept pace with construction cost inflation. The gap between the insured sum and the actual rebuild cost is the block's uninsured exposure.
Fire risk assessment outputs directly affect your premium
Insurers ask increasingly detailed questions about cladding type, FRA status, and evacuation strategy. A block with an outstanding fire safety action plan, or cladding that has not been assessed, will pay a significantly higher premium — or may struggle to find cover at all.
Commission on block insurance is now disclosable by law
The Leasehold and Freehold Reform Act 2024 gives leaseholders the right to request details of any commission paid in connection with block insurance. RTM directors should know what commission, if any, is being received on the policy — and ensure it is documented and disclosed when requested.
Auto-renewal is costing blocks money
Insurers routinely apply above-inflation increases at renewal knowing that many managing agents and RTM companies will not retender. The market for block insurance is competitive — but only if you participate in it by obtaining alternative quotes.
The insurance premium is a service charge and must be reasonable
Leaseholders can challenge the cost of block insurance at the First-tier Tribunal under the reasonableness test in the Landlord and Tenant Act 1985. An RTM company that cannot justify its insurance arrangements with documented evidence of market testing is exposed.
Who Arranges Block Insurance — and Who Is Responsible
The obligation to arrange buildings insurance for a block of flats is set by the lease — and in most cases it falls to whoever holds management obligations for the building.
For a traditionally managed block, the freeholder typically arranges the insurance and recoups the premium through the service charge. When leaseholders exercise their Right to Manage, that responsibility transfers to the RTM company — which must arrange and maintain adequate cover from the date it takes over management.
The practical implications for RTM directors are significant. As directors of the managing company, they are personally responsible for ensuring the block is properly insured, that the cover is placed at a reasonable market rate, and that the arrangements are transparent to leaseholders. This is not a delegatable obligation — even where a managing agent or insurance broker handles the day-to-day placement, the RTM company's directors remain accountable for the outcome.
If a block suffers a major loss event and the insured reinstatement value is lower than the actual rebuild cost, the shortfall is an uninsured gap. In an RTM-managed block, leaseholders who suffer loss as a result of that gap may have a claim against the RTM company — and its directors — for failure to arrange adequate cover. This is not a theoretical risk; it has resulted in successful claims in blocks where reinstatement values were not updated for years.
What Block Insurance Must Cover
Block insurance is not a single product — it is a package of cover types, and what your policy includes (and excludes) determines whether you are actually protected when something goes wrong.
| Cover Type | What It Covers | Essential or Optional? |
|---|---|---|
| Buildings — reinstatement | The structural cost of rebuilding the entire block following a total or partial loss — fire, flood, subsidence, impact. Must be to full reinstatement value, not market value. | Essential — required by virtually all leases |
| Property owners' liability | Third-party claims against the building owner / RTM company arising from injury or damage connected to the property. Typically £5m minimum. | Essential — legal exposure without it is unlimited |
| Employers' liability | Claims by anyone employed by the RTM company — including casual workers, cleaners, or caretakers — for injury at work. Legally required if the block employs anyone. | Required if staff employed |
| Directors and officers (D&O) | Personal liability cover for RTM company directors facing claims arising from their management decisions. Covers legal costs and any awarded damages. | Strongly recommended for all RTM directors |
| Engineering / lift inspection | Statutory inspection of lifts and other pressure vessels, plus breakdown cover. Required where the block has a passenger lift. | Required if lifts present |
| Loss of rent / alternative accommodation | Covers rent loss or rehousing costs for leaseholders made homeless by an insured event while the block is being reinstated. | Standard addition — include as standard |
| Terrorism | Damage caused by terrorist acts — not covered under standard property policies without this extension. | Optional — relevant in urban locations |
| Legal expenses | Costs of pursuing or defending legal action connected to the property — including service charge disputes, nuisance claims, and prosecution defence. | Optional — valuable for RTM companies |
Individual leaseholders' contents — furniture, personal possessions, internal fixtures they have installed — are not covered by block insurance and are each leaseholder's own responsibility. The dividing line between what the block policy covers and what is the leaseholder's responsibility is often a source of confusion after loss events; it is worth confirming this in a clear resident communication.
Why Block Insurance Premiums Are Rising in 2026
Block insurance is not getting more expensive because managing agents are profiteering — the underlying market has fundamentally shifted, and the forces driving costs are structural rather than temporary.
Note: Figures above are illustrative of the direction and scale of market movement based on published industry data; they are not precise benchmarks for any individual block or insurer.
Construction cost inflation
Labour shortages, materials cost increases, and supply chain disruption following Brexit and COVID have driven UK construction costs up significantly since 2021. Because block insurance is based on reinstatement value, every increase in rebuild costs translates directly into a higher insured sum — and therefore a higher premium. Blocks that have not had their reinstatement value professionally assessed since 2020 are likely to be both underinsured and still paying a premium based on an outdated lower value.
Post-Grenfell fire risk reassessment
The Grenfell Tower fire in 2017 fundamentally changed how residential block insurers price fire risk. In the years since, several major insurers have exited or significantly reduced their residential block book, reducing market capacity. Blocks with ACM or HPL cladding, or with outstanding fire safety remediation, face significant premium loadings or outright refusals. Even blocks with no cladding issues face higher premiums as the overall market has repriced.
Climate-related claims
Flooding, subsidence, and storm damage claims have increased in frequency and severity across the UK as weather patterns shift. Insurers have responded by tightening underwriting criteria and increasing premiums, particularly in flood-risk zones and areas with expansive clay soils susceptible to subsidence during drought periods. Blocks in affected postcodes are seeing disproportionate premium increases.
Reduced insurer capacity
The combination of fire risk concerns and adverse loss ratios has led several major insurers to reduce their exposure to the residential block sector. Fewer insurers competing for the same pool of risk means less competitive pressure on pricing. Specialist London market capacity remains available — but at a premium compared to the commoditised products that previously dominated this space.
Claims inflation
The cost of settling claims — particularly escape of water, the most frequent type of residential block claim — has risen with general inflation. Labour and materials costs for repair work, as well as increased use of third-party loss assessors by claimants, have pushed average claim costs higher even where claim frequency has remained stable.
Regulatory and compliance costs
The Building Safety Act 2022 and its associated requirements have added a compliance cost layer to residential block insurance underwriting. Insurers are more likely to request detailed building information — fire risk assessments, external wall system details, maintenance records — before offering terms. Blocks that cannot provide this information quickly face delays, higher premiums, or referral to specialist (more expensive) markets.
Reinstatement Value: The Hidden Risk Most Blocks Are Carrying
The single most common and most costly insurance failure in residential blocks is underinsurance caused by an out-of-date reinstatement value — and it is almost entirely preventable.
Reinstatement value is the cost of demolishing and rebuilding the block to its current specification — not its market value, not what it sold for, not what a surveyor would value it at for sale purposes. A flat worth £400,000 on the open market might have a reinstatement value of £600,000 or more, because rebuild costs are driven by construction economics, not property market demand.
The problem is that reinstatement values are often set once — at the start of a policy, or when the RTM company first takes over — and then increased annually by a flat inflation index without any professional reassessment. Given that construction cost inflation has been running at significantly above CPI since 2021, this indexation approach has left many blocks materially underinsured.
The average condition clause: why partial claims hurt too
Most block insurance policies include an "average condition" or "underinsurance" clause. This means that if a claim is made and the block is found to be underinsured, the insurer will reduce the claim payout proportionally — not just cap it at the difference. A block insured for £4m that has an actual reinstatement value of £5m is not just exposed on a total loss; it would receive only 80% of any partial claim too.
The practical consequence is that a flood claim for £100,000 in a 20%-underinsured block would be settled at £80,000 — leaving the RTM company to find the remaining £20,000 from the service charge fund. Multiplied across a major loss event, the exposure is significant.
We recommend a professional reinstatement cost assessment by a RICS-qualified building cost surveyor at least every three years — and annually for older blocks or those that have undergone significant works. The cost of a professional assessment (typically a few hundred pounds) is negligible against the exposure created by getting the figure wrong. We build this into the management cycle for every block we manage.
Commission: What It Is and Why RTM Directors Need to Understand It
Insurance commission is a payment from the insurer to whoever places the policy — and it is paid from the premium, which is ultimately a service charge cost borne by leaseholders.
Commission arrangements in block insurance have been a source of significant controversy in the leasehold sector. The concern is straightforward: if a managing agent receives a commission of, say, 20% on a £15,000 block insurance premium, they receive £3,000 — funded by the leaseholders — as an incentive to place business with that particular insurer. This creates a potential conflict of interest between the agent's financial interest (maximising commission) and the leaseholders' financial interest (minimising premium cost).
The Leasehold and Freehold Reform Act 2024 has addressed this directly. Leaseholders now have a statutory right to request full details of the insurance arrangements, including:
- The name of the insurer and the policy number
- A summary of the cover provided
- The total premium paid
- The amount of any commission or other payment received by the managing agent, freeholder, or any connected party in connection with the insurance
For RTM companies, the commission dynamic is structurally different — because the RTM company acts in the leaseholders' interests rather than as a separate profit-taking freeholder. But RTM directors should still be aware of and document any commission arrangements on the block's insurance, and ensure they can demonstrate to leaseholders that the policy was placed on the best available terms rather than to maximise commission income.
Insurance brokers legitimately receive commission from insurers as part of their remuneration model — this is standard practice and is distinct from the practice of managing agents receiving undisclosed commission on top of their management fee. The key issue is disclosure: leaseholders are entitled to know the total commission paid in connection with their block's insurance policy, regardless of who receives it.
Leaseholder Rights on Block Insurance in 2026
The Leasehold and Freehold Reform Act 2024 significantly strengthened leaseholder rights in relation to block insurance — and RTM directors should understand what leaseholders are now entitled to request.
| Leaseholder Right | What This Means in Practice | Position Pre-2024 Act |
|---|---|---|
| Request the insurance policy | Leaseholders can request a copy of the full policy document. The RTM company or managing agent must provide it within a prescribed timeframe. | Existed under earlier legislation Unchanged |
| Request a summary of cover | A plain-language summary of what the policy covers and what exclusions apply, in a format accessible to non-specialists. | New right Strengthened |
| Request premium details | The total premium paid, including any insurance premium tax. | Existed via service charge accounts Unchanged |
| Request commission disclosure | Full details of any commission or payment made to any party in connection with the insurance — including the amount, who received it, and on what basis. | New right Major strengthening |
| Challenge reasonableness | Application to the First-tier Tribunal if the insurance premium is considered unreasonably high or the cover inadequate given the cost. | Existed via LTA 1985 Unchanged |
For RTM directors, the practical implication is clear: you need to be able to respond promptly and accurately to any leaseholder insurance information request. Keep the current policy document, the premium breakdown, and any commission disclosure in an accessible location — ideally in your block's compliance record — rather than relying on retrieving it from the broker at short notice when a request arrives.
How to Reduce Your Block's Insurance Premium
Rising market conditions do not mean your block is getting the best deal available — and there are concrete steps RTM directors and managing agents can take to manage insurance costs without compromising cover.
If your reinstatement value has not been professionally assessed in the past three years, commission one now. An accurate reinstatement value means you are not paying premiums on an inflated insured sum — and it protects you from the average condition clause on any future claim.
Do not auto-renew. Instruct a specialist residential block insurance broker to obtain terms from multiple insurers and present a comparison. The broker's job is to find the best available cover at a competitive price — holding them to that is your job as RTM director.
Insurers ask detailed questions about fire safety status at renewal. A current FRA with a documented action plan and evidence of completed remediation presents a materially better risk profile than a block with an outdated assessment or outstanding actions. The premium difference can be significant.
A block with multiple escape-of-water claims in recent years is a worse risk to an insurer than one with a clean record. Consider whether investment in preventive maintenance — particularly pipework, flat roofs, and drainage — could reduce claims frequency and therefore improve your renewal terms over time.
If your block has any cladding — including rendered insulation systems, rainscreen panels, or any non-brick external facing — you need to be able to provide the insurer with accurate details of the system, its fire rating, and the outcome of any EWS1 or equivalent assessment. Inability to provide this information flags the block as a higher risk.
Agreeing to a higher voluntary excess — the amount the block pays before the insurer contributes — reduces the premium. For blocks with a healthy reserve fund and a low claims history, this can be an effective way to reduce annual cost. The excess level should be calibrated against the fund balance and typical claim sizes for the block's risk profile.
Frequently Asked Questions
The responsibility for arranging buildings insurance for a block of flats rests with whoever is obliged to do so under the lease — usually the freeholder or, in an RTM-managed block, the RTM company. The lease will typically require buildings insurance to be maintained to full reinstatement value.
In most blocks managed by an RTM company, the RTM company both arranges the insurance and recovers the premium through the service charge.
Several factors have combined to drive block insurance premiums sharply higher since 2021. Construction cost inflation has significantly increased reinstatement values — the cost of rebuilding a block has risen faster than general inflation, meaning insurers face higher potential claims.
Climate-related events including flooding and subsidence have increased claims frequency. Post-Grenfell, insurers have also reassessed their exposure to fire risk across the residential block sector, with many reducing capacity or applying significant premium loadings to blocks with any cladding concerns.
A standard block insurance policy should cover buildings to full reinstatement value, property owners' liability, employers' liability if the block employs any staff, directors and officers liability for RTM company directors, engineering inspection and breakdown cover for lifts and other plant, and loss of rent or alternative accommodation costs following an insured event.
Terrorism cover and legal expenses are typically available as add-ons. Contents insurance for individual flats is a separate matter for each leaseholder.
Yes. Under the Leasehold and Freehold Reform Act 2024, leaseholders have enhanced rights to request insurance information including the policy document, a summary of cover, the premium, and details of any commission paid to the managing agent or freeholder.
The insurance premium is part of the service charge and subject to the reasonableness test under the Landlord and Tenant Act 1985. Leaseholders can challenge insurance costs they consider excessive at the First-tier Tribunal.
Insurance commission is a payment made by the insurer to the party placing the insurance — typically the managing agent or freeholder — as a percentage of the premium. The cost is ultimately borne by leaseholders through the service charge, while the commission is received by the agent or freeholder.
The Leasehold and Freehold Reform Act 2024 requires commission to be disclosed to leaseholders on request. RTM companies are in a structurally cleaner position because they act in leaseholders' interests — but directors should ensure any commission arrangements are transparent and documented.
Block insurance should be reviewed annually at renewal as a minimum. A full market retender — obtaining quotes from multiple insurers or brokers — should be carried out every two to three years, or sooner if the premium increases significantly at renewal or if the block's risk profile changes materially.
Staying with the same insurer year after year without testing the market is a common and avoidable source of overpaying.
Not sure whether your block's insurance is adequate — or competitively priced?
Neon reviews block insurance arrangements as part of every new management engagement. We can assess your current cover, reinstatement value, and premium against the current market — and tell you plainly whether you are well-placed or exposed.
Book a free insurance review call →