Item 10 - Block Building Insurance Scheme
West Dunbartonshire Council · 29 October 2025
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WEST DUNBARTONSHIRE COUNCIL Report by Chief Officer - Resources Council: 29 October 2025 _______________________________________________________________________________ Subject: Block Building Insurance Scheme 1. Purpose 1.1 This report updates on the status of the Council’s provision of Building insurance to owners of former council houses under the “Right to Buy” Block Building Insurance Scheme, and seeks approval of a revised approach to delivering the Scheme. 2. Recommendations 2.1 It is recommended Members: i) approves the Council continues to administer and deliver the Block Building Insurance Scheme until the expiry of the current insurance policy on 31 March 2028 ii) approves the Council withdraws from the Block Building Insurance Scheme following 31 March 2028 with an exit strategy to be reported to Council by October 2027 iii) note Block Building Insurance Scheme participants will be kept informed of progress on any relevant developments. iv) note a further report will be presented to Council in October 2027, outlining a proposed exit strategy. 3. Background 3.1 The Council procures and administers the ‘Right to Buy’ Block Building Insurance Scheme (the Scheme), which provides Building insurance cover to owners of former council houses purchased under the terms of the Right to Buy legislation. The Scheme applies to all ex-council housing sold under Right to Buy from 1987 onwards in the area of the former Clydebank District Council, and from 1996 onwards in the West Dunbartonshire Council (the Council) area. 3.2 The primary aim of the Scheme is to ensure adequate insurance coverage is in place for privately owned former council properties located in blocks where the Council retains ownership of one or more units (for example, a four-in-a-block where two homes are privately owned and two remain Council owned). In addition to providing homeowners with insurance, the Scheme reduces the financial risk to the Council and other owners in the event of loss or damage, particularly where uninsured losses might create shared liability. 3.3 Historically, the Council has arranged and managed the procurement of the Scheme for privately owned former council properties. In 1987, the ITEM 10
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former Clydebank District Council changed the conditions of sale for Right to Buy properties to require purchasers to participate in the Scheme. Sales completed prior to this change were not subject to this condition. The former Dumbarton District Council did not include any such requirement in its Right to Buy sales. Following local government reorganisation in 1996, all Right to Buy sales made by the Council included the condition that the purchaser must participate in the Scheme. 3.4 At the 24 November 2021 Corporate Services Committee meeting officers were asked to investigate the feasibility of introducing a standardised insurance cover allowing owners to procure their own insurance provided it met Council defined standards. This resulted in a follow-up report to the Committee on 23 February 2022 at which the Committee agreed to continue with the existing approach and maintain Council procurement and administration of the Scheme. 3.5 Any participant may request to opt out of the Scheme, however before granting any request, the Council will assess whether there is a risk of total or uninsured loss that could leave the Council financially liable either through insurance exposure or common property liability. Where the Council retains ownership of any property within the block any request to opt out will be refused. If the Council no longer retains any ownership in a block, individual owners, or all owners collectively, may opt to leave the Scheme. 3.6 The Scheme includes an excess of £0 for standard cover and £50 for accidental damage. Consequently the vast majority of claim costs are covered directly by the insurer. This provides significant value to residents as it offers extensive coverage with minimal out-of-pocket expenses. Comparable individual insurance policies often have higher excesses and premiums. Consequently, participation in the Scheme has historically provided a cost-effective and protective option for homeowners, delivering peace of mind and financial security. 4. Main Issues 4.1 This report has been prepared in response to concerns raised by owner- occupiers and Members regarding the Scheme. The concerns primarily relate to: clarity of responsibilities and obligations under the Scheme scope and detail of insurance cover cost of the policy, particularly a significant increase in 2025/26. These concerns have arisen in the context of a maturing insurance contract, recent claims history, and volatile market conditions, all of which have affected premium levels and insurer appetite. 4.2 The current Scheme contract began on 1 April 2022, with an initial term of three years and an option to extend for a further two years, expiring on 31 March 2027.
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4.3 In 2024, following internal consultation with officers from Resources, Housing, and the Council’s insurance broker, discussions took place regarding the proposed two-year extension. Initial projections showed that extending by two years would result in an 85% increase in premiums for owner-occupiers. However, based on advice from the broker, a revised approach was agreed of a three-year extension (to 31 March 2028) which reduced the increase in premiums to 50%. While still significant, this longer-term arrangement offered greater stability, spread cost increases over a longer period, and reduced short-term financial pressure on policyholders. 4.4 The broker’s recommendation to extend the contract for three years was based on the following key considerations: Worsening claims experience including Storm Eowyn (2024/25) and water damage claims (2022/23) which negatively impacted risk profile. Challenging market conditions including inflation, material/labour cost increases, and reduced insurer capacity. Outdated rating structure with 2021 rates no longer reflective of current risks or costs. Short-term extension risks which could result in significant cost volatility or an inability to secure terms in 2027. Limited insurer appetite due to claims history. Forward risk mitigation, locking in rates now may result in more favourable conditions by 2028 if claim performance improves. 4.5 There are presently 4,474 owner-occupiers enrolled in the Scheme. Legal advisors representing purchasers of ex-Council properties are responsible for informing them of the title condition that mandates participation in the Scheme. Additionally, the Council’s Sold Property Team provides purchasers with detailed information on annual costs, including insurance premiums, factor fees, and any other relevant charges. 4.6 A property’s insurance premium is determined by applying the insurance rate per £1,000 to the property's rebuild cost value (calculated per square metre). So even if the insurance rate remains static, premiums can increase annually due to rising rebuild valuations, which are adjusted in line with construction industry price indices. While the overall upward trend continued between 2022 and 2025, the insurance rate remained fixed under a three-year agreement, providing protection to policyholders from rate increases. Consequently the 2025/26 increase, while significant, it reflects cumulative market changes that have not been passed on over the previous three years. If these increases had been applied incrementally over that period, the impact would have been more gradual and less noticeable to policyholders. 4.7 Invoices issued to policyholders comprise the following elements: Insurance premium - calculated using the property's rebuild value and the applicable rate per £1,000.
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Insurance Premium Tax - set at 12% by the UK Government. Factor charges - reviewed and set annually by the Council through its budget-setting process. Therefore increases in the total invoice amount are not solely the result of changes to the insurance rate. Instead, they reflect a combination of rising property values, inflationary pressures, and annual uplifts in factor charges all of which would continue to apply even in the absence of the Scheme. 4.8 In 2025/26 the annual premium to the Council for all policy holders for the Scheme amounts to £1.754 million comprising: Insurance Premium - £1.566 million Insurance Premium Tax - £0.188 million Of this the Council has paid £1.362 million directly to the insurer. The remaining £0.392 is retained by the Council to cover the financial risk linked to non-payment by policyholders and Scheme administrative expenses including invoicing, communications with policyholders, annual renewals, and document handling. However this assumes 100% collection of the £1.754 million. The Council takes on the upfront financial responsibility by paying the full premium to the insurer. Policyholders are subsequently invoiced for their individual shares, and in cases of non-payment, the Council’s Corporate Debt Team follows established procedures to recover the outstanding amounts. 4.9 At the most recent renewal, the Scheme’s collection rate was approximately 83%. Based on this collection rate the Council will collect £1.456 million of the total billed £1.754 million which leaves £94,000 for the Council after paying the £1.362 million to the insurer. This £94,000 is to cover the costs of administering the Scheme and managing the financial risk associated with non-payment. It is estimated this funding supports the equivalent of approximately 1.8 full-time equivalent (FTE) positions within the Finance and Sold Property teams. While precise allocation of staff time is not recorded, this estimate reflects the resource requirements necessary to effectively manage the scale and operational demands of the Scheme. 4.10 Due to the Scheme being embedded in the title deeds of ex-Council properties, any exit plan to withdraw or amend it will require a legal review of title conditions, formal notification to all affected scheme members, and possible administrative steps to vary or discharge deed obligations on a case-by-case basis. These legal and operational implications were key considerations in the February 2022 Corporate Services Committee decision to continue the Scheme at that time. However, since that decision, a number of material changes have emerged:
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claims experience has worsened increasing the Council’s risk profile insurer appetite has declined with only one tender received during the most recent procurement exercise costs to owner-occupiers have risen significantly due to inflation and the end of the fixed-rate period collection rates remain sub-optimal exacerbating financial risk to the Council the Council’s insurance broker’s advice suggests the Scheme is unlikely to be sustainable beyond the current term. Taken together, these developments have significantly altered the strategic and financial context of the Scheme, strengthening the case for a managed exit upon expiry of the current policy. 4.11 Benchmarking with the other 4 Scottish Councils who operate a similar scheme highlighted key challenges and risks that further support the recommendation to exit the Scheme at the end of the current policy term: The Council has faced a significant premium increase due to adverse claims experience and challenging market conditions, this reflects wider market instability but is exacerbated by local risk factors. The Council’s restrictive opt-out policy, while aligned with other councils, limits flexibility for owners and contributes to administrative complexity and financial risk. Collection rates and cost recovery are consistent with sector norms, but the ongoing risk of non-payment and associated financial exposure remains significant. 4.12 The Council’s brokers have advised there is a limited number of insurers willing to underwrite this type of insurance. This low market interest is likely influenced by the current excess levels and the Council’s recent claims history with 717 claims between April 2022 and May 2025 amounting to a total cost the insurer of £2.3m. This claims experience has directly impacted insurers’ pricing, terms, and overall appetite to continue supporting the Scheme as evidenced by only one tender being received during the most recent procurement exercise. 4.13 If the Council were to withdraw from the Scheme before the expiry of the current contract, financial penalties would apply in addition to forfeiting £2.5m, which is the insurance premium that is paid in advance. The exact amount of any such penalty cannot be confirmed at this stage, as it is dependent on several variable factors including the timing of withdrawal, the value of remaining contractual obligations, and any administrative or notice charges applied by the scheme administrator. Indicative estimates suggest that the cost could be material, and confirmation of the precise figure will be sought should the Council wish to explore withdrawal further. Importantly, early withdrawal is likely to impact existing claims or claims in progress, as the insurer is not obligated to honour claims submitted after cancellation, even if the
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incident occurred during the original policy period. The policy wording suggests cancelling the policy will invalidate the insurance meaning there will be no cover for any losses after cancellation even if the incident happened when the policy was in place. However, if a claim has already been made that the insurer has accepted before cancellation, that claim would still be honoured. This presents a significant risk to the Council and policyholders. Additionally, cancellation would trigger complex legal and administrative processes, particularly given that participation in the Scheme is a condition within property title deeds. 4.14 As part of this review officers considered several alternative options but these were ultimately dismissed: Continuing with the current arrangements, , would not address the challenges posed by insurer market limitations or the Council’s claim history. Attempts to re-procure the Scheme under revised terms attracted minimal market interest, resulting in only one tender submission. Proposals to introduce opt-out provisions or outsource insurance and factoring services to external managers were rejected due to legal restrictions and the complexity of implementation. A self-insurance model (i.e. covered by wider Council insurance) is not viable, as owner participation is legally required through title conditions, and all insurance policies incur insurance premium tax. 4.15 It is recommended the Council continues the administration of the Scheme under the current model until 31 March 2028 with a report to be brought back to Council in October 2027 detailing the full exit strategy. 5. People Implications 5.1 There are no significant direct people implications arising from this report, aside from the resource requirements within Regulatory & Regeneration, Resources, and Housing and Employability to effectively implement the future exit strategy. 5.2 The Council currently retains a modest amount of funding to administer the Scheme. It is anticipated that the removal of the Scheme will have staffing implications. Further details regarding the impact of exiting the Scheme will be provided to Council in October 2027. 6. Financial and Procurement Implications 6.1 The cost of the insurance is charged annually to the property owners. As the Council manages and administers the Scheme, it retains a portion of the total premium to cover the associated administrative expenses and the financial risk of non-payment by policyholders. 6.2 The recommended approach is expected to have no material financial implications for the Council. 6.3 There are no procurement recommendations as a result of this report.
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7. Risk Analysis 7.1 The houses covered by the current policy were required to accept such a condition as part of the Right to Buy sale from the Council in order to minimise risk to remaining Council housing. The recommended approach maintains this risk mitigation until 31 March 2028. 8. Equalities Impact Assessment (EIA) 8.1 The report does not alter any existing Council policy or pattern of service delivery though to comply with best practice a screening was undertaken which did not highlight any issues. 9. Consultation 9.1 Regulatory & Regeneration, Resources and Housing and Employability have been consulted on the contents of this report. 9.2 If recommendation approved, officers will inform scheme members of the decision and the proposed changes to the policy parameters, including the reasons for these changes. Officers will then proceed with exiting the Scheme at the end of the current policy term. Scheme members will be fully consulted on the exit strategy, with comprehensive information provided to support their transition to alternative insurance arrangements. 10. Strategic Assessment 10.1 In alignment with the Council's Strategic Plan 2022–2027, this report demonstrates that maintaining the Scheme until 31 March 2028 supports the delivery of key priorities: Our Communities – Resilient and Thriving: By ensuring the continued provision of the Scheme, the Council contributes to the resilience and well-being of communities, safeguarding residents' homes and fostering a sense of security. Our Economy – Strong and Flourishing: The Scheme supports economic stability by protecting property values and reducing the financial burden on homeowners, thereby contributing to a flourishing local economy. Our Council – Inclusive and Adaptable: The Council's commitment to administering the Scheme reflects an inclusive approach, ensuring all residents have access to essential services and are supported in adapting to changing circumstances. By continuing the provision of the Scheme, the Council upholds its commitment to these strategic priorities, ensuring the successful delivery of its long-term objectives.
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Laurence Slavin Chief Officer – Resources Peter Barry Chief Officer – Housing Date: 30 September 2025 Person to Contact: Michelle Lynn, Asset Manager Email: michelle.lynn@west-dunbarton.gov.uk Alan Young, Housing Asset & Investment Manager Email: alan.young@west-dunbarton.gov.uk Appendices: Appendix 1 – Equalities Impact Assessment Background Papers: Motion by Councillor Martin Rooney – Call for a Review of Sold Property Block Building Insurance: Council 18 June 2025. Report by the Chief Officer Resources – Block Building Insurance: Corporate Services Committee 23 February 2022. Report by the Chief Officer Resources – Block Building Insurance: Corporate Services Committee 24 November 2021. Report by the Strategic Lead for Resources – Block Building Insurance for Privately Owned Ex-Council Properties: Corporate Services Committee 10 August 2016. Wards Affected: All