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Commercial building

Machinery Inherent Defects Insurance

Modern buildings are becoming increasingly complex with up to 30% of construction costs relating to the mechanical and electrical services that support them. These mechanical and electrical services can be plagued by defects caused by poor design, materials or workmanship and this can be highly problematic for the owners and occupiers of affected buildings.

A traditional remedy has been the provision of collateral warranties by contractors. But with insolvencies in the construction and real estate sectors running at over 3,000 a year* in England and Wales alone, these cannot always be relied upon and can be very difficult and costly to enforce. Increasingly developers, owners, funders and occupiers are turning to the security and reliability of inherent defects insurances. Which is why, HSB Engineering Insurance, as part of Munich Re, has developed a market leading Machinery Inherent Defects Insurance (MIDI) product to meet these risks.

What is Machinery Inherent Defects Insurance?

Available for periods of up to 12 years**, our policy covers actual or impending damage caused by an inherent defect in insured property that existed prior to practical completion of the building. Additional cover is also available for the loss of rental income suffered as a result of a defect.

The MIDI policy applies to the mechanical and electrical services installed in the building including:

  • Boilers, space heating, ventilation and air conditioning systems
  • Lifts and escalators
  • Building maintenance units
  • Electrical distribution systems
  • Equipment used for building security and environmental control
  • Electrical and mechanical parts of water pumping, pressurisation and distribution systems

Cover is available for:

  • New buildings undergoing construction
  • 'Shell and core' building refurbishments
  • Completed buildings less than two years old

* The Insolvency Service statistics - February 2014
** Cover is available for up to 12 years following practical completion of the building

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This publication is available exclusively to Munich Re clients. Please contact your Client Manager.