Why It's Essential for BTR Developers to Choose an 'A' Rated Insurer for New Home Warranties

Opting for an insurance company with a solid financial rating will assure Developers that they are long-term players in the market and won’t be at risk of closure during uncertain times. As policyholders, it’s essential to investigate and select ‘A’Rated insurance companies renowned for reliably settling and paying claims when needed.

Achieving an ‘A’ Rating is challenging, indicating that credit agencies consider the insurance company financially robust. In claim situations, the insurer’s ability to pay is crucial. An ‘A’ Rated insurer is regularly evaluated by prominent international rating agencies like A.M. Best, Fitch, Moody’s, or Standard & Poor’s (S&P). These agencies conduct comprehensive reviews of the insurer’s long-term financial stability and ability to settle claims. Insurers with lower ratings, such as ‘B’ or ‘C’, are considered less capable of fulfilling claims.

Un-rated insurers carry a higher risk as they haven’t been assessed for financial strength. Some foreign insurers, not regulated by UK or EU insurance standards, may pose an increased risk of failure, potentially leaving customers uninsured and vulnerable to financial losses.

In the UK, insurers have no legal mandate to have a rating, nor are brokers like us obligated to provide products and services exclusively from rated insurers. While both rated and unrated insurers can potentially fail, statistically, unrated insurers are more likely to pose a higher risk.

The UK’s rental housing market has undergone notable transformations in recent years, with the Build to Rent (BTR) sector becoming increasingly prominent. BTR involves the creation of residential properties expressly for rent, not for sale, to individual homeowners. This new housing approach attracts interest from developers, investors, and renters, significantly altering perceptions of renting in the UK. 

What is Build to Rent?

Build to Rent developments typically consist of high-quality, professionally managed apartments or houses.  Unlike traditional rental properties, BTR projects are purpose-built with tenants’ specific needs and preferences. These developments often include communal spaces, gyms, rooftop gardens, concierge services, and pet-friendly facilities. The focus is on creating a vibrant community atmosphere, fostering a sense of belonging, and offering a hassle-free living experience for renters.

Housing developers in the UK are increasingly opting for Build to Rent (BTR) schemes for several reasons:

1. Steady Revenue Stream: BTR projects offer a consistent and long-term revenue stream from rentals instead of the one-time profit from selling homes. This steady income can be more appealing, especially during market volatility.
2. Growing Demand for Rentals: There’s a rising demand for rental properties in the UK, particularly among young professionals and those who prefer the flexibility of renting over homeownership. BTR schemes cater to this growing market.
3. Professional Management: BTR schemes often include professional management, which can attract tenants seeking high-quality services and amenities. This can also simplify operations for developers.
4. Urbanisation and Changing Lifestyles: With more people moving to cities and changing lifestyle preferences, there’s a shift towards renting in urban areas. BTR schemes are often located in city centres, aligning with this urbanisation trend.
5. Government Support: The UK government has supported the BTR sector as part of its broader housing strategy, recognising it as a way to increase housing supply and meet diverse housing needs.
6. Investor Appeal: BTR projects are becoming increasingly attractive to institutional investors due to their potential for stable returns, making it easier for developers to secure funding.
7. Changing Housing Needs: The BTR model is adaptable to changing housing needs, such as the demand for more sustainable and community-focused living spaces, which can be more efficiently integrated into rental developments.

These factors combined make BTR schemes an increasingly popular choice for developers in the UK’s dynamic housing market.

Build to Rent is transforming the UK’s rental housing landscape. Its focus on tenants, superior amenities, and professional management offers renters an enhanced and comfortable living experience. For developers, BTR projects are becoming lucrative long-term investments due to their consistent income and the increasing demand for rental properties.

As this sector grows and evolves, Build to Rent is poised to become a key player in meeting the UK’s housing requirements and defining the future of renting in the nation.

Why choose Build-Zone Build to Rent Inherent Defects and Structural Warranty Solutions?

• Long-term ‘A’ rated insurer capacity
• Single structure limits available in excess of £300m
• Cover offered on a Full Value Reinstatement Basis, with no inner financial limits
• 10 or 12 year policy period
• Loss of rent cover available
• Each project is individually underwritten and technically appraised, meaning that there is no technical manual to adhere to – giving you greater creativity in the scheme’s design
• An in-house technical team and independent auditors will provide input and advice from the design stage to practical completion.

Contact Build-Zone for a quote today.

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References:

https://www.buildtorentcouncil.org/what-is-build-to-rent/

https://www.landlordtoday.co.uk/the-big-issues/2023/6/long-term-profits-why-build-to-rent-is-a-smarter-investment

https://www.bbc.co.uk/news/business-48351150

https://propertyindustryeye.com/the-future-of -build-to-rent/