If you’re involved in any significant new build or redevelopment project, you’ll need to consider protecting your asset against the financial implications of structural defects that become evident only after project completion. That’s where Latent Defects Insurance (LDI) comes in.
Protecting your investment for the long term.
If you’re involved in any significant new build or redevelopment project, you’ll need to consider protecting your asset against the financial implications of structural defects that become evident only after project completion. That’s where Latent Defects Insurance (LDI) comes in.
Developers, property owners and investors in the construction and real estate sector recognise LDI as an important risk management tool. Damage and/or loss during the construction phase of a development project will be insured under a Construction All Risks (CAR) insurance policy. It is this policy that will repair or reinstate the damaged works. At practical completion a property policy will be arranged. However, this policy normally provides no protection for damage arising out of an inherent or latent defect in the building.
We take the time to understand all the unique aspects of your scheme - whether that’s building type, construction methods or specific risk factors relating to it intended use. Then we genuinely deliver tailored LDI solutions.
Damage and/or loss during the construction phase of a development project will be insuredunder a Construction All Risks (CAR) insurance policy. It is this policy that will repair or reinstatethe damaged works. At practical completion a property policy will be arranged. However, thispolicy normally provides no protection for damage arising out of an inherent or latent defect in thebuilding.
What we bring to your business
Damage from structural defects, including design, materials, workmanship and specification
Water ingress due to defects in the waterproofing envelope
Damage from defects in the mechanical and electrical services
Rental or revenue protection for property owners and landlords
Residential or homeowner warranty
Consequential damage to non-structural elements
Immediate remedial action for the threat of collapse
Cover from 10 or 12 years from the completion of the construction works
Who we cover
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Property owners and landlords
Commercial real estate developers
Luxury real estate developers and owners
Urban redevelopment companies
Financiers and lenders
Commercial tenants
Our Latent Defects Team
Rahul Sharma
Partner
rahul.sharma@lockton.com
+44 207 933 2112
Daryl Harris
Senior Vice President
daryl.harris@lockton.com
+44 7464 496 251
Get in touch
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Latent Defects FAQs
What is Latent Defects Insurance and why is it important for real estate and construction projects?
Latent Defects Insurance is a specialist insurance policy that covers defects in the design, workmanship or materials of a building that are not immediately visible after construction but which appear over time. LDI is crucial for real estate and construction projects as it protects property owners, developers, and investors from the financial implications of structural defects that could compromise the building’s integrity and safety. LDI insurance enhances the marketability of newly constructed properties, provides balance sheet protection, and offers a straightforward claims process with no need to establish fault - only to show that damage resulted from a defect.
What does LDI cover, and what are the key benefits of having this type of insurance?
LDI typically covers a range of issues, including structural defects (e.g. foundations, walls, roofs), defects in design, poor workmanship, material defects, and water ingress due to construction faults. The key benefits of LDI include protecting the property owner from the high costs of repairing such defects, which might otherwise significantly impact financial stability. LDI policies are written for the benefit of the property itself, rather than a specific legal entity, making them easy to transfer to new owners, thereby enhancing the property’s value and salability.
How is LDI different from other types of construction-related insurance policies?
LDI differs from other types of construction-related insurance policies such as Professional Indemnity Insurance or Contractors’ All Risks Insurance, in that it provides first-party cover without requiring proof of negligence or fault. Unlike liability policies, where proving negligence is required to make a claim, LDI policies only require the claimant to demonstrate that damage occurred due to a latent defect in design, materials, or workmanship. LDI also typically covers a longer period than other policy types, often 10 to 12 years after project completion.
What types of companies typically purchase LDI, and why?
Many companies involved in the real estate and construction sectors buy LDI, for a variety of reasons:
Developers of residential, commercial, and mixed-use properties frequently purchase LDI to protect their investment from potential structural defects that could arise after project completion. Having LDI in place also enhances the appeal and value of their properties to potential buyers or investors by providing an additional layer of security and assurance.
Companies that invest in real estate, such as investment funds, property management firms, and Real Estate Investment Trusts (REITs), use LDI to protect against unforeseen repair costs that could impact their financial stability. LDI ensures that if latent defects appear, they have coverage for the cost of repairs, safeguarding their financial returns and preserving asset value.
Large construction firms or contractors may arrange LDI on behalf of their clients as part of a comprehensive risk management strategy. By including LDI in their suite of risk covers, they provide reassurance to clients and fulfil contractual requirements, especially for high-value or complex projects.
Banks, mortgage lenders, and other financial institutions involved in the financing of construction projects often require LDI as a condition of the loan. LDI mitigates their risk exposure by ensuring that the property securing their loan remains structurally sound and retains its value.
Housing associations and local authorities purchase LDI to protect their investments in social housing and public buildings. LDI helps ensure that funds are not diverted to cover unexpected repair costs due to latent defects, allowing them to maintain financial stability and focus on their core services.
Freeholders and companies managing blocks of flats or other multi-unit properties may purchase LDI to protect common areas and shared structures. This coverage helps ensure that all leaseholders are safeguarded against potential costs arising from latent defects that affect the building’s structure or common facilities.
All of these companies invest in LDI primarily to reduce their exposure to financial risk, ensure regulatory and contractual compliance, enhance the salability and value of their properties, and provide peace of mind to stakeholders that potential defects will be covered without lengthy legal disputes.
Why might you want to choose Lockton to provide tailored LDI solutions?
Lockton stands out for its ability to deliver bespoke LDI solutions that are tailored to the specific needs of each project, especially for large-scale or complex developments. With a deep understanding of construction practices, building regulations, and potential defect risks, Lockton provides precise advice and tailored insurance cover that aligns with the unique characteristics of each project. Lockton’s strong relationships with a wide network of insurers and underwriters allow it to negotiate favourable terms, coverage limits, and premiums, ensuring the best possible protection for clients at competitive prices.