April 2018 Energy Act – HSB Engineering research reveals only 18% of insurance brokers are aware of the effects

Energy-Efficiency

There are now only two months until the new Minimum Energy Efficiency Standards (MEES) deadline arrives. Specialist engineering and construction insurer HSB Engineering Insurance warns that commercial property owners who are not prepared could lose significant amounts of rental income as non-compliant properties become increasingly difficult to rent out.

Investors must meet the MEES grade E on their Energy Performance Certificate (EPC), by the deadline of 1st April 2018. This new regulation applies to residential and commercial properties rented out in the private rented sector and will come into effect on 1st April 2018 for new tenants and for all existing tenancies by 1st April 2020.

Research from HSB highlights a lack of awareness in the insurance market* with only 18% of UK insurance brokers surveyed aware of the effect the Energy Act 2011 will have on property owners when it comes into force in April 2018.

Andy Bazley, Underwriting Manager at HSB commented: “The introduction of the energy act will have an impact on the commercial property insurance market.  Lower rated commercial properties will not only become less attractive to future occupants but may suddenly become illegal to rent out without energy saving upgrades in place to bring them up to the required level. With fines of up to £150,000 for non-compliance it is essential that property owners are aware of the new regulations.” 

Commercial landlords and property owners could help meet the requirements by investing in energy saving improvements; such as retrofitting LED lighting, more efficient boilers, improved building management systems, voltage optimisation, and insulation.  These energy saving projects often require funding that is secured against future energy cost savings.  HSB’s Energy Efficiency Insurance product can offer protection against a shortfall in those savings giving property owners and lenders a guarantee that savings will be achieved even if the initiatives fail to meet the initial projections.

Andy Bazley continued: “We saw an opportunity for a product which could provide market leading insurance cover to protect energy efficiency projects; protecting not only the installed assets but the revenues they generate and the savings they produce.”

With the energy efficiency standards deadline fast approaching, an increase in the number of energy efficiency projects is anticipated as investors and developers realise the impact of the minimum standards on rental income.

*Survey conducted between November and December 2017. 250 UK insurance brokers were interviewed