Rendall and Rittner making 40% profit on leaseholders’ insurance premiums via offshore ‘captive company’

The Leasehold Knowledge Partnership has published the results of an in- depth investigation, in liaison with concerned leaseholders at Rendall and Rittner managed developments, which exposes how Rendall & Rittner, which is owned by R&R Residential Management Limited is making large profits from an off-shore ‘captive company’.

R&R Residential Management Limited says on its website “… we pride ourselves on the fact that we do not receive insurance commissions” but the R&R group also owns a captive insurance company based in Guernsey, Artex Insurance (RR4) IC Limited, that has returned an approximate 40% profit every year since it was set up in 2015.

Artex makes clear that its business is based on an alternative to commissions by underwriting some of the risk.

Leaseholders argue that there is no risk involved in this re-insurance business with AXA, which according to the accounts routinely over-pays for re-insurance with Artex.

The use of captives is well established in the insurance market, but they are owned by the insured who pays the premium, so they are handling their own money. The concern here is the use of captive insurance companies owned by agents/intermediaries, which inevitably gives rise to apprehension of a conflict of interest.

Last Friday the FCA, which has also been contacted by legal academics over build warranty inadequacies, issued two statements Buildings insurance for leasehold properties and Leasehold Buildings Insurance which are, in effect, a rebuke to the insurance sector in leasehold.

Leaseholders who have contacted LKP see this as acknowledgement that “innovative structures” are a work-around to the scrutiny of regulators and the ARMA Q ethical guidelines of Rendall and Rittner’s own trade body, ARMA.

Indeed, Rendall and Rittner seems to have some concerns about the offshore nature of this business as evidenced in p37 of its Financial Statement 30 June 2020 when it considers the tax position of its offshore company’s profits. “The company is taking further advice and subject to that advice may approach HMRC for confirmation”.

LKP has asked Rendall & Rittner whether it has sought the advice of HMRC and what was the result.

It did not address this, but after emails exchanged with co-founder Matt Rittner, which included the substance of this article, it provided a statement saying that “[we] believe a captive structure provides better alignment of interest between our customers and ourselves, removing the perception that we have no incentive to control claims tightly, a criticism frequently made of commission-based arrangements.”