Risk Protection Arrangements – The New Insurance Option

From 1 September 2014 a new DfE Voluntary Risk Protection Arrangement (RPA) will be available to:

• Free Schools;
• Faith Schools that are Academies;
• Special Academies;
• Alternative Provision Academies;
• UTCs;
• Studio Schools; and
• Private Finance Initiative Academy Trusts.

This will provide an alternative to conventional land and buildings insurance.  Schools will have the choice, at no additional cost or premium,  to opt into it either before conversion or before their current insurance arrangements comes to an end. Please note that this is an alternative to insurance rather than a policy of insurance in itself.  Under RPA, risks are covered and losses paid from Government funds.

Benefits of the RPA

As detailed on the Government’s website, “The RPA will protect academy trusts against losses due to any unforeseen and unexpected event. The intention is that the RPA will, as a minimum, cover risks normally included in a standard schools insurance policy.

As well as significant cost savings for school budgets, trusts that opt in to the RPA will avoid complex and time-consuming procurement of commercial insurance cover. Opting in to the scheme and updating cover is simple and quick.”

Existing Academy Leases

In existing academy leases responsibility for insurance is with either the Academy, as a tenant, or the Local Authority, as Landlord (with the Academy picking up the bill).  RPA is not an insurance policy and consequently by entering into it the lease terms will be breached.

What does this mean for your Academy?

If your Academy is still going through the conversion process you may be able to negotiate an exclusion to allow entry into RPA.

If your Academy converted during the run up to the introduction of this scheme you may have already negotiated an ability to opt out of your current insurance arrangements when the scheme becomes operational.

For all other converted Academies wanting to enter into RPA it will be necessary to vary the terms of the current lease with the Local Authority.  The Local Authority will be under no obligation to agree to amend the lease or to allow your Academy to join RPA. As a bare minimum Local Authorities will expect their legal costs to be picked up by your Academy.  DfE has indicated an intention to issue a letter of assurance to all Local Authorities in order to deal with various concerns that have been raised.  Whether Local Authorities will accept this, and be willing to permit wholesale changes to Academy Leases, remains to be seen.

If your School or Academy is considering entering into RPA, it is important to take legal advice now.  This will ensure a smooth transition to the new scheme and most importantly of all, to ensure that cover is maintained in the transition period.

If you require further information, please contact Richard Nixon on 0191 211 7924.