Insuring against rising fire risk
Fire risks and resulting insurance claims for commercial premises have grown significantly in recent years. There are various factors influencing risks, such as unusually hot and dry weather, demanding work schedules with prolonged hours, and the UK’s ongoing drive for sustainability.
James Mountain, sales and marketing director, Fire Shield Systems, considers the factors influencing risk, and unpicks the role of insurers in strengthening underwriting for policies concerned with fire protection to reduce the risk of claims and ensure safer premises.
Acknowledging different risks and environments
A business premises’ fire risks will vary between industries, and in order to maximise protection and minimise claims this needs to be considered by insurance policies.
The necessity of fire protection and suppression systems is widely recognised. However, often building policies will simply specify that high-risk sites need to have an ‘approved fire protection and suppression system’ in place. This can create ambiguity, allowing business owners to cut corners and opt for a cheaper solution that may not account for the unique fire risks of their operating environment. For example, they might choose an automatic suppression system that’s not fit for purpose or install a sprinkler system to protect the warehouse shell – rather than the valuable equipment inside that is essential for business continuity.
When insuring high-value business assets, such as vehicles and machinery, insurers will often approve pre-fitted systems that are installed as part of a manufacturer’s deal. However, it’s important to consider that these systems aren’t necessarily effective in every operating environment. For example in high-risk industries, such as ports and docks, waste and recycling or manufacturing and processing, pre-fitted systems may not account for vehicles and machinery in continuous operation with little downtime.
Currently, there’s no legal requirement for fire protection systems to achieve a certain standard or meet any particular specifications in many high-risk industries. In order to effectively mitigate site risks and reduce insurance claims, finetuning underwriting to account for individual site risks is essential. However, this process requires extensive understanding of any relevant risks that may occur from the site’s day-to-day operations. This begins with a highly-detailed risk assessment.
What’s influencing the risks?
Factors influencing risks within high-risk industries include:
• Increasing reliance on battery power and storage
As the UK continually drives for sustainability, high-risk industries are increasingly reliant on sustainable power sources. As a result, the number of lithium-ion (li-ion) batteries on commercial sites is increasing.
These batteries create new fire risks, as traditional fire suppression systems aren’t as effective at mitigating the unique fire risks li-ion batteries pose. They require a unique solution, and insurance policies for buildings that plan to store or use these batteries should outline the unique risks and necessary protection measures. Additionally, as the use of li-ion batteries is growing within domestic vehicles and commercial fleets, any insurance policies for underground car parks or vehicle storage facilities should also consider these growing risks.
• Materials stockpiling
The impact of Brexit on the UK’s international trade means there are large stockpiles of materials in industries such as ports and docks and waste and recycling. As a consequence, storage and capacity of combustible materials has become a real and growing issue in these industries.
This has created a ‘juggling act’ between insurers and businesses, as sites are becoming more and more reliant on their fire suppression systems, making it critical for them to match their unique operating environment to effectively reduce fire risks.
• Rising seasonal temperatures
As the UK continues to record hotter and drier temperatures than previous years, the risk of indoor and outdoor fires is continually increasing, particularly in the summer months.
This makes stored combustible materials much drier and more susceptible to direct heating due to prolonged periods of sunlight. When kept in stockpiles, these materials can form hotspots, which are difficult to identify and control with traditional fire detection systems. Risk management is made even more difficult as wind can spread hotspots further. From the insurer’s perspective, any policies must ensure that outdoor fire suppression systems can operate effectively during more extreme weather conditions, such as heat and wind.
How can you insure against them?
How buildings are used ultimately determines fire risks, influencing the insurance underwriting that’s necessary to effectively mitigate these risks.
Although all sites are different, there are some broad questions that should be considered to promote fire safety through insurance policies:
- What are the individual fire risks?
General risks will need to be addressed prior to any insurance approval in most commercial sites.
However, a highly-detailed risk assessment that acknowledges industry-specific and site-specific risks, in addition to the necessary calibre and best-suited types of fire protection and suppression solutions to minimise these, will create robust insurance policies that maximise safety and minimise claims.
- How will fire risk be identified?
After risks are made clear, any policy should look for evidence as to how fire risks will be detected once they arise. There will be mitigation measures in place, for example, regular cleaning and maintenance in order to protect machinery from debris build up, but this needs to be supported by an effective fire detection system.
Any detection system must be suitable for its unique operating environment. For example, in waste and recycling or warehouses with large material stockpiles, thermal imaging detection may be more effective. Whereas in a manufacturing process flow, spark and ember detection systems may be more effective.
- How will the site respond after detection?
Insurers need to consider how a site might respond in the event of a fire – eg automatic vs manual activation. If this is manual, how will a system user be notified of a detected risk?
Once activation has taken place, insurers must again consider whether a particular suppression solution is suitable for the unique operating environment. For example, if a site has high-value equipment, a water mist suppression system may be more effective in suppressing fire whilst minimising damage, whereas in a battery storage facility, a specified battery suppression system can be more effective to minimise risk.
As insurance fire claims continue to rise, ensuring policies are only approved when detection and suppression systems match the unique risks of the site’s operating environment is essential.
For more information, visit Fire Shield Systems or call 0800 975 5767.
