How Insurers Price Office Block Risks (Full Breakdown)

Introduction

If you own, manage, or invest in an office block, you’ve probably seen premiums swing year to year even when you haven’t made a claim. That’s because office blocks are priced using a mix of hard numbers (rebuild cost, claims history, sums insured) and “risk signals” (construction, fire protection, occupancy, maintenance, and management quality).

This guide breaks down how UK insurers typically price office block risks, what underwriters look for, and what you can do to present your building well and avoid paying for avoidable risk.

1) The starting point: what exactly is being insured?

Office block risks are usually packaged as commercial property (buildings and contents) plus optional add-ons. Pricing starts by defining the exposure:

• Buildings: the cost to rebuild (not the market value)

• Landlord’s contents: items you own as landlord (e.g., carpets in common areas, plant, furniture in reception)

• Tenants’ contents: usually excluded unless specifically arranged

• Loss of rent / business interruption: how long it would take to reinstate after a major loss

• Property owners’ liability: injury/damage claims linked to the premises

• Terrorism: often separate (Pool Re)

• Engineering / plant: lifts, boilers, pressure systems, air conditioning

• Legal expenses: disputes, evictions, contract issues

Underwriters price each section differently. A building with a low premium on “property damage” can still be expensive once you add loss of rent, escape of water exposure, liability, and engineering.

2) The core rating engine: rebuild cost and base rate

For the buildings section, many insurers start with a rate per £100 of sum insured (or a similar base factor). The rebuild cost is the anchor because it represents the maximum likely severity.

Key point: if your declared rebuild cost is wrong, pricing can be distorted in both directions:

• Understated rebuild cost can trigger underinsurance concerns, tougher terms, or claims settlement issues.

• Overstated rebuild cost can inflate premium unnecessarily.

Best practice is a recent RICS rebuild valuation (or a credible professional assessment) especially for larger blocks, older buildings, or complex construction.

3) What insurers are actually pricing: frequency vs severity

Underwriters think in two big buckets:

• Frequency: how likely losses are (e.g., escape of water, theft, malicious damage)

• Severity: how big losses could be (e.g., total fire, major flood, structural issues)

Office blocks often have moderate frequency risks (water damage, accidental damage, vandalism) and potentially high severity (a serious fire, major flood, or long reinstatement period).

4) The big pricing drivers (and why they matter)

4.1 Construction type

Construction is one of the first things asked because it affects fire spread, repair complexity, and reinstatement time.

• Standard construction (brick/stone walls, concrete floors, slate/tile roof) tends to attract better terms.

• Non-standard construction (timber frame, thatch, certain cladding systems, unusual roof materials) can increase rates.

Insurers also care about external wall systems (including cladding) because of post-Grenfell scrutiny. Even for office blocks, any uncertainty around materials can lead to higher premiums or additional information requests.

4.2 Age of building and condition

Older buildings aren’t automatically “bad”, but they can signal:

• ageing electrics

• legacy plumbing

• flat roof issues

• hidden voids

• higher likelihood of water ingress

A well-maintained older building with documented upgrades can price better than a newer building with poor maintenance.

4.3 Occupancy and tenant profile

Occupancy is crucial because it changes both frequency and severity.

• Single tenant vs multi-let: multi-let can increase complexity and claims frequency.

• Tenant activities: “office use” is not always purely office. Insurers want to know if there are:

  • kitchens/canteens

  • server rooms

  • storage of flammables

  • workshops or light manufacturing

  • public-facing areas

• Hours of use: 24/7 occupancy can reduce some theft risks but increase wear and tear and water losses.

4.4 Unoccupancy and partial occupancy

Empty space is a major pricing factor. Unoccupied floors or long void periods increase:

• vandalism and theft

• malicious damage

• escape of water going unnoticed

• arson exposure

Many insurers apply unoccupancy loadings or impose conditions (e.g., weekly inspections, water isolation, intruder alarm requirements).

4.5 Fire protection and fire risk management

Fire is the “catastrophe” peril for many office blocks.

Underwriters look at:

• fire alarm type (e.g., monitored vs unmonitored)

• detection coverage (communal areas, risers, plant rooms)

• compartmentation and fire doors

• emergency lighting and signage

• maintenance records (alarm servicing, extinguisher checks)

• fire risk assessment quality and actions completed

A current Fire Risk Assessment with evidence of completed actions can materially improve underwriting confidence.

4.6 Electrical risk

Electrical faults are a common cause of property fires.

Insurers often ask for:

• EICR (Electrical Installation Condition Report) and remedial work evidence

• portable appliance testing (PAT) where relevant

• details of any high-load areas (server rooms, EV chargers)

If the EICR is overdue or shows “C1/C2” issues not remedied, expect tougher terms.

4.7 Escape of water (the premium killer)

For office blocks, escape of water claims can be frequent and expensive.

Underwriters consider:

• number of kitchens/tea points per floor

• age and material of pipework

• presence of sprinkler systems (can reduce fire severity but increase water exposure if poorly maintained)

• claims history for leaks

• whether there are water leak detection systems

• whether stopcocks are accessible and labelled

Even a few “small” water claims can push premiums up because they signal ongoing maintenance issues.

4.8 Flood and subsidence exposure

Location-based perils are priced using mapping and data models.

• Flood: river, surface water, coastal. Insurers look at elevation, proximity to water, historic events, and defences.

• Subsidence/heave/landslip: soil type, nearby trees, historic movement, and prior claims.

If you’re in a higher-risk zone, insurers may apply higher excesses, restrict cover, or require risk improvements.

4.9 Security and theft/vandalism

Security is priced based on both the building and the area.

Factors include:

• intruder alarm grade and whether it’s monitored

• CCTV coverage and retention

• access control (fobs, intercoms)

• perimeter lighting

• physical protections (locks, shutters for ground-floor glazing)

• history of break-ins

Unoccupied areas again matter here: empty floors are easier targets.

4.10 Claims history and “risk behaviour”

Past claims are one of the strongest predictors of future claims.

Insurers look at:

• number of claims in the last 3–5 years

• type (water, theft, storm, liability)

• cost and whether it’s trending up

• what was done to prevent recurrence

A building with multiple repeat water claims but no evidence of remedial work will usually attract a higher rate than a building with one large claim and a clear improvement plan.

5) How insurers build the premium: common components

While every insurer’s model differs, pricing often includes:

1. Base rate (linked to occupancy and construction)

2. Peril loadings/credits (water, flood, theft, subsidence)

3. Sum insured factor (higher sums can attract rate reductions, but not always)

4. Loss of rent / BI factor (indemnity period and rent roll)

5. Excess structure (higher excess can reduce premium)

6. Policy conditions (warranties/endorsements can reduce insurer exposure)

7. Insurer expenses and profit margin

8. Insurance Premium Tax (IPT)

In practice, underwriters also apply judgement. Two similar buildings can price differently based on the quality of information and the confidence they have in management.

6) Excesses: why they change and what’s “normal”

Excesses are a key lever. Insurers use them to manage frequent losses.

Common examples:

• Escape of water excess: often higher than the standard excess

• Flood excess: can be significant in higher-risk areas

• Subsidence excess: typically higher and sometimes fixed

If your premium has jumped, check whether the insurer has also changed the excesses. Sometimes the “headline premium” looks better but the excess is doing the heavy lifting.

7) Reinstatement period and loss of rent: the hidden driver

Loss of rent is often underappreciated.

Underwriters ask:

• total annual rent roll

• lease structures and rent guarantee expectations

• indemnity period (12, 18, 24, 36 months)

Longer reinstatement periods can increase premium, but underinsuring the time needed can be a false economy. Office blocks can take longer to reinstate due to:

• planning constraints

• specialist materials

• contractor availability

• asbestos discovery

• cladding remediation requirements

8) Engineering and plant: lifts, boilers, and inspection regimes

If your office block has lifts or significant plant, insurers may require:

• LOLER inspections (for lifting equipment)

• pressure systems inspections

• service contracts and maintenance logs

Engineering claims can be expensive and disruptive. Good maintenance records can help pricing and reduce exclusions.

9) Terrorism: why it’s often separate

In the UK, terrorism cover is commonly arranged via Pool Re. Pricing depends on:

• postcode/location

• sum insured

• occupancy type

Even if you don’t buy terrorism cover, lenders or lease requirements may effectively force the decision.

10) What makes an underwriter say “yes” quickly (and price better)

Office block risks price best when the submission is clean, complete, and credible.

A strong presentation includes:

• full address and postcode

• construction details (walls/roof/floors)

• year built and major refurb dates

• number of storeys, total floor area

• occupancy split (tenants, uses, any higher-risk occupiers)

• unoccupancy details (if any) and management plan

• rebuild cost basis (RICS valuation date)

• fire protections and alarm details

• EICR date and outcome

• water management approach (leak detection, stopcock access, inspection regime)

• security measures (alarm/CCTV/access control)

• claims history with remedial actions

If you can show you run the building like a professional asset (not a “hope it’s fine” property), you typically get better outcomes.

11) Practical ways to reduce premium (without gutting cover)

Here are changes that often improve terms:

• Commission a RICS rebuild valuation to avoid inflated sums insured.

• Complete an EICR and close out remedials.

• Implement water leak detection in high-risk areas and document it.

• Introduce a written unoccupancy procedure: inspections, water isolation, waste removal, security checks.

• Upgrade/maintain fire alarm and ensure servicing is up to date.

• Improve compartmentation (fire doors, riser sealing) where identified.

• Tighten tenant controls: no hot works without permits, manage contractors, enforce housekeeping.

• Increase escape of water excess strategically if claims are low and cashflow allows.

• Provide a clear risk improvement plan if the building has known issues.

12) Common mistakes that increase premium

• Using market value instead of rebuild cost

• Leaving “office use” vague when there are higher-risk activities

• Not disclosing unoccupied areas

• Repeated small water claims with no remedial evidence

• Out-of-date compliance documents (FRA, EICR, lift inspections)

• Poor-quality submissions (missing details, inconsistent sums, no photos)

FAQs

How do insurers calculate the rebuild cost for an office block?

They don’t usually calculate it themselves. They rely on the declared sum insured, ideally supported by a RICS valuation or professional estimate. If it looks unrealistic, they may query it or apply cautious pricing.

Why is escape of water so expensive on office block policies?

Because it’s frequent and can be severe: leaks can spread across floors, damage electrics, disrupt tenants, and create long reinstatement timelines.

Does having a sprinkler system reduce premium?

Often it can reduce fire severity pricing, but it may also introduce water damage considerations. The net effect depends on system type, maintenance, and the insurer.

What’s the best indemnity period for loss of rent?

It depends on the building and how quickly you could realistically reinstate after a major loss. Many office blocks choose 18–24 months; complex risks may need longer.

Will a single claim increase my premium?

Not always. Insurers care about the type of claim, the cost, and whether it indicates an ongoing problem. A one-off storm claim is viewed differently to repeated water leaks.

Call to action

If you’d like a second opinion on your office block insurance, we can review your current cover, rebuild cost, claims experience, and risk controls, then approach the right UK markets with a clean submission.

Speak to Insure24 to discuss your office block risk, or request a quote and we’ll come back with options and practical ways to improve terms.