Our journey to net zero could be thwarted by insurance barriers

The construction sector is notoriously, and regrettably, high-polluting. The Chartered Institute of Building estimates that the built environment is responsible for 30% of total global greenhouse gas emissions, with construction consuming 32% of the world’s natural resources. In the UK alone, the built environment generates 45% of the country’s 246 million tonnes of emissions every year.

There is therefore significant pressure for the industry to slash its carbon footprint – and a wide range of challenges to be overcome in order to play its role in the UK’s goal of achieving net zero carbon development by 2050.

One of the key mechanisms for achieving this is greater adoption of timber as a construction material.

There is a risk that insurers will struggle to provide adequate cover and protection for contractors deemed to be working with so-called unsafe materials

Generating significantly lower emissions during production and construction than traditional materials such as concrete and steel, timber boasts a host of environmental benefits. These include carbon sequestration, significantly faster build times with minimal waste, and powerful heat insulation properties.

Critically, timber consistently performs well against fire safety tests. Dense, compressed timber building materials, such as cross laminated timber (CLT), will char rather than fully ignite in a fire, allowing buildings to retain their structural integrity for several hours.

> From the archive: How is the CLT industry responding to the combustibles ban?

However, there has been historical reluctance to adopt timber due to misconceptions over its safety credentials. This is true not only of the housebuilding and construction industry itself, but of insurers, who may be wary of providing cover on projects using materials perceived to be hazardous.

This has been exacerbated by renewed scrutiny of fire and building safety regulation, at the heart of which lies the Building Safety Bill. Although it is yet to be formally passed into law, it is nonetheless set to deliver an expansive programme of regulatory change, and a suite of new safety standards.

Plotting a safe path to net zero

Questions remain over how insurers can adapt. Most pertinently, there is a risk that insurers will struggle to provide adequate cover and protection for contractors deemed to be working with so-called unsafe materials.

There are two key reasons for this. The first is that housebuilders and contractors will have greater responsibility than ever before to ensure the safety of developments.

Construction firms will be answerable to a new national Building Safety Regulator (BSR) with extensive regulatory powers. While initially it will regulate only multi-occupied residential buildings, ultimately this will expand to cover any building where there are concerns over fire and building safety, greatly expanding the regulatory burden contractors must shoulder.

If these restrictions end up blocking the progress of housing and construction projects involving timber, the country’s journey to net zero could be significantly hampered

The second is the introduction of a ‘duty holder’ role, a point person within each project team with responsibility for sharing information with the BSR throughout the building’s lifecycle. This introduces additional areas of risk during building design and construction due to the potential for human error, and ensuring adherence to a complex and unfamiliar set of guidance.

Any breach of these new and more onerous regulations could lead to criminal prosecution or a substantial fine. Which places insurers in a difficult position – how likely are they to extend professional indemnity insurance to those liable for fire and building safety, especially in a challenging insurance market with reduced capacity?

Ultimately, if these restrictions end up blocking the progress of housing and construction projects involving timber, the country’s journey to net zero could be significantly hampered.

Robust communication

But there is a way to avoid unintentionally thwarting efforts of the housing and construction industry to champion more sustainable development. Collaboration between companies and insurers is key.

An important first step is to establish the extent to which existing policy wordings provide adequate cover for proposed timber construction projects, and how they stack up against new tighter fire and structural safety requirements.

Then, regular communication must be established throughout the lifecycle of a building’s development, in order to maintain transparency over any potential risks or breaches of regulation. This process provides both insurer and insured with time to conduct any necessary due diligence and risk assessments, thereby allowing projects to provide smoothly and safely.

Seeking outside fire engineering counsel is also critical. Objective external support on proposed timber developments, with a robust analysis of fire safety and potential hazards, affords the opportunity for any red flags to be rectified at the earliest possible design stages, providing comfort for insurers that issues have been tackled and addressed head on. 

Insurers and housebuilders/contractors alike have a role to play in ensuring they comply with new regulation, and the additional opportunities and requirements it creates, rather than seeing them as a potential barrier. Enhancements to new fire and building safety regulations are necessary, and welcome – but understanding how to navigate this new regulatory landscape now is critical to prevent stalling the journey to net zero by holding back timber construction.

Paul Lowe is a partner at Weightmans