The industry that played with fire

With each new fire on a timber-frame site, insurers are becoming warier of the risks posed by this form of construction. The release of government statistics last month confirming that fires in half-constructed timber-frame buildings cause a greater area of damage than those in conventional structures has done little to allay those fears.

With commercial fire claims at their highest for two decades, and 40% of fire losses of more than £150,000 stemming from modern construction builds (in many cases timber frame), it is little wonder that insurers are becoming more selective about their risks.

Contractors and developers that employ a range of construction techniques across a broad portfolio of projects can still get cover. Provided the timber-build element of their turnover is relatively small - say less than 20% - insurers will write the risk because it is balanced out by lower risks across the rest of the portfolio.

But it’s a different story for specialist and smaller businesses. Timber-frame builders, social housing organisations, or public bodies such as hospitals or schools that are looking to find cover only for timber-frame projects will struggle to find an insurer. And where they do, the cost is likely to be at least 50% higher than for conventional projects.

Furthermore, any one-off timber frame risk that is more than £15-20m in value is unlikely to be underwritten by a single insurer. Instead, the broker will have to approach at least two, if not three companies, to share the risk. For conventional build, most insurers would be happy to accept a risk in the region of £30-40m before spreading their exposure.

As technology improves and timber frame buildings get bigger, the insurance issue is likely to become harder to resolve. So what can be done to allay insurers’ concerns?

In the first instance, there is scope for the building industry to improve its risk profile. Anecdotal evidence suggests that builders are not always meticulous in following the two bibles when it comes to timber frame safety - the Joint Code of Practice issued by the Association of British Insurers and the Chief Fire Officers’ Association, and the UK Timber Frame Association’s 16 steps to Fire Safety. Reports that the association is threatening to eject member firms (which comprise 80% of the industry) that do not follow its guidelines are welcome, but confirm concerns that standards are not as high as they should be.

As insurers become more selective, they will increasingly check for compliance with these codes which recommend that builders have security patrols physically on site at all times. Insurers now expect developers to require that watchmen be on constant patrol or actively monitoring CCTV feeds and checking wireless smoke, heat and fire alarms.

This vigilance is essential because evidence shows that developers have at best 10 minutes in which to deal with a fire. If action is not taken within this time, the fire will generally be burning with such intensity it is likely to set adjacent properties alight, simply by heating up the facing part of the structure.

For this reason, insurers are also insisting that a fire hydrant be installed at the start of the construction process, so that the fire brigade can have instant access to large volumes of water.

Insurers will inspect sites to ensure the appropriate measures have been taken and will seek evidence that there are effective processes in place to ensure close control over all hot work.

Once builders have satisfied insurers, cover can be provided, but these are not “one size fits all” insurances and the cost and scope of cover will be tailored to individual circumstances, so builders will need to work hard with their brokers to present a strong case for high quality cover at an affordable price. If builders are unable to prove that all precautions were taken and that security was active, claims are likely to be contested.

David Hayhow is a director and specialist in construction insurance with insurance broker Lockton