The Building Safety Act 2022 did not just lengthen the limitation period — it forced the PI market to rebuild how it prices, structures and erodes capacity on construction risks.
This guide is the second pass on the Act for buyers who already understand the headline mechanics — section 135’s thirty-year retrospective extension of the Defective Premises Act 1972, section 130 building liability orders, the Higher-Risk Buildings regime — and need to understand how the PI market has actually responded. The focus here is on the underwriting and policy-structuring questions that decide whether your cover is fit for purpose: aggregate versus each-and-every limits, the defence-cost erosion problem on long-tail building safety claims, and the run-off question that no construction professional can now avoid. If you have read our companion guide The Building Safety Act 2022 and PI Insurance and want the practical underwriting layer, this is it.
For four renewal seasons the PI market has been pricing the Building Safety Act risk into construction terms. The pattern has been broadly consistent. Capacity tightened across architects, engineers, building surveyors, design-and-build contractors and approved inspectors. Several markets withdrew from residential construction PI altogether. Those that stayed introduced fire safety, cladding and combustible materials exclusions of varying breadth, aggregate fire safety sub-limits, and higher self-insured retentions. Premium rises were significant on residential-heavy books and more modest on commercial-only books, though even commercial-only firms with historic dwelling exposure have faced searching questions.
The market has not stayed flat since. Capacity has gradually returned at the well-managed end of the book — firms with clear historic exposure mapping, clean claims history, and disciplined risk management have seen modest softening. Firms with material EWS1 work, signed-off Higher-Risk Building projects, or unresolved circumstance notifications have not. The bifurcation has become more pronounced rather than less. Underwriters who started the cycle pricing the macro risk are now pricing the specific firm.
The most consequential structural change for buyers is the use of aggregate limits. Construction PI used to be sold on each-and-every claim limits with defence costs in addition — meaning each separate claim had access to the full limit. Many markets have moved to a hybrid structure: an each-and-every limit for general PI claims, but an annual aggregate cap on fire safety or building safety claims specifically. That structure pencils nicely on paper but exposes the insured to a sequencing problem: the first major claim in the year can consume the building safety aggregate, leaving subsequent notifications uninsured under that head until renewal.
A PI policy responds when a claim is first made and notified during the period of insurance. Building Safety Act exposures are different from traditional PI exposures in three ways that drive how the policy mechanically responds.
First, the limitation tail is now thirty years on retrospective Defective Premises Act 1972 work and fifteen years prospective under Building Safety Act 2022, section 135. That means the policy responding is rarely the policy in force when the act or omission occurred. It is almost always a much later policy, often with materially different wording, sub-limits and exclusions to the policy under which the work was originally done. Continuity of cover — same insured, continuous policy, consistent retroactive date — becomes the load-bearing structural element of the programme.
Second, aggregation is being tested harder. Under AIG Europe Ltd v Woodman [2017] UKSC 18 and Spire Healthcare Ltd v Royal & Sun Alliance Insurance Plc [2022] EWCA Civ 17, the courts have set out how “related matters or transactions” aggregate. A block of flats with a single defective cladding system across multiple leasehold claims may aggregate to one occurrence — favourable on per-claim erosion of the each-and-every limit, unfavourable on a single-claim aggregate cap. The aggregation argument is now run in the opposite direction depending on whose claim is up next.
Third, defence costs erosion on building safety claims is severe. Technical experts on fire engineering, cladding metallurgy and compartmentation are scarce and expensive. Pre-action correspondence on a single Defective Premises Act claim can run to six figures before pleadings. If defence costs sit inside the limit, capacity disappears before the substantive claim is reached. RICS Minimum Approved Wording requires defence costs in addition; ARB does not prescribe wording, so architect policies should be checked individually. Section 11 of the Insurance Act 2015 may provide some protection where insurers seek to rely on conditions unrelated to the actual loss, but the buyer should not rely on litigation to make that point.
A multidisciplinary practice — architects and engineers under common ownership across two trading entities — holds £15m aggregate PI with a £7.5m fire safety sub-limit and defence costs in addition. In year one of the policy, a 2011 mixed-use residential scheme generates a Defective Premises Act claim from the freeholder seeking £4.8m. Defence costs run to £900,000 across eighteen months. The claim settles at £3.4m, well within the fire safety sub-limit but consuming £4.3m of total programme capacity once defence costs are added.
Mid-year, an unrelated 2018 scheme produces a second notification — £2.1m pleaded. The fire safety aggregate sub-limit has £4.1m of headroom but defence costs on the second matter immediately begin to erode the wider £15m programme. The practice’s broker confirms with the insurer that defence costs continue outside the limit per the schedule, and runs an aggregation analysis treating the two schemes as unrelated transactions under the AIG v Woodman framework — preserving two separate erosion lines rather than one. At the following renewal, the practice negotiates restoration of the fire safety sub-limit on a reinstatement basis, accepting a moderate additional premium rather than a higher retention.
Run the renewal as a structural exercise, not a price exercise. Three structural questions should be answered before the broker goes to market:
On the commercial side, get at least three markets to a firm quote stage, including a Lloyd’s specialist where the broker has access. Reinstatement of aggregate sub-limits is increasingly available — ask for it.
Apex’s view: The market has reached the point where the structural questions matter more than the price questions on construction PI. We see firms accept a 12% premium reduction without realising they have moved from each-and-every to aggregate, or from defence costs in addition to defence costs inside the limit. That is not a saving; it is a different policy. We continue to advise construction professionals to run the limit structure conversation in writing, retain the schedule comparison with the prior year, and budget for the run-off question as a thirty-year planning horizon. The Act is not going to be narrowed by the regulator. Plan as if it will not be.
Apex Insurance Brokers serves UK professional services firms and commercial businesses. Call 0117 325 0027, email hello@apexinsurancebrokers.co.uk, or request a quotation.
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