Grenfell Tower fire highlights importance of loss prevention

The tragic Grenfell Tower fire in London this June shows the importance of loss prevention measures in saving lives, protecting reputations and property, say brokers and insurers. The fire, in which about 80 people are thought to have died, has put fire safety in the limelight, and not just for public sector organisations. Risk managers in the commercial sector have also been asking questions, according to Ian Kennett, managing director of the real estate practice at Marsh in the UK. In particular, risk managers have been keen to understand the likely response of insurers, and if there are implications for potential future claims, he explained. Public sector property owners were quick to carry out fire safety investigations after Grenfell, but some commercial property owners have since followed suit, according to Mr Kennett. The immediate focus was on commercially-owned residential property, but offices and factories are also known to use cladding in their construction. “Risk managers should look to review fire safety and seek advice, but this is something we would expect them to do anyway,” said Mr Kennett. “Companies should be taking a risk-led approach to fire safety and not just rely on insurance – there are many issues at stake, not least the protection of life and reputation,” he said. However, the UK property insurance market has been highly competitive for a number of years, with excess capacity and new entrants. This shows little sign of changing. In a competitive market, it is harder for insurers to reward insureds for risk prevention measures – such as installing sprinklers – with lower premiums. Across a large portfolio of properties, for example, there is little differentiation in price of insurance between a property with sprinklers and one without, according to Mr Kennett. Corinne Southarewsky, chief claims officer at AXA Corporate Solutions, said industrial companies are focusing more on fire loss prevention and safety, driven by awareness of higher values and business interruption losses, corporate social responsibility and reputational damage. “Recent fires do highlight the importance of risk prevention in protecting property and people. And we do see more industrial companies looking for insurance partners for loss prevention services and advice,” she said. This is a view shared by Tom Roche, senior consultant, international codes and standards at FM Global in the UK. “In a world of emerging and intangible risks, the tragic events at Grenfell Tower are a stark reminder that businesses and communities alike must remain committed to mitigating traditional, physical risks like fire,” said Mr Roche. “At FM Global, we work with our clients to help them avoid property loss such as fire, and we continue to see fire as the largest cause of loss,” he said. According to Mr Roche, FM Global believes that the majority of losses are preventable. The insurer conducts research and modelling at its research campus in Rhode Island to understand how a fire behaves. “When you understand how a fire behaves, you can take effective steps to mitigate it. The appropriate use of building materials, and the presence of automatic sprinklers, can play a significant role in reducing the impact of a fire,” according to Mr Roche. In fact, the average damage in a factory with a well-designed and fully functional sprinkler system is about €580,000, according to FM Global. The figure for factories lacking sprinklers is €8.45m – some 15 times more. FM Global makes the point that fire regulation in the UK is “quite rightly” centred on life safety, and as such does not cover the protection of property. “This aspect is often misunderstood: a recent study by YouGov on behalf of the Business Sprinkler Alliance noted that nearly 70% of businesses surveyed felt that following building regulation guidance would protect their property from fire. This is not the case,” said Mr Roche. There has been a general downward trend in the number of UK fires during the past ten years, according to Zurich. But workplace fires are often “larger and more complex” than previously seen, explained Paul Redington of Zurich’s major loss property team. Zurich Insurance also sees a wide range of factors contributing to fire risk, some of which are not commonly appreciated and many of which are avoidable. These include the storage of flammable materials, storage of waste, electrical faults and hot works by contractors. The insurer also highlights modern construction methods as another common cause of commercial property fires. These include timberframe buildings, polystyrene cladding and modular construction, which can increase fire risk if managed poorly. “The main commonality between major incidents is a ready source of fuel – mostly combustible material that allows a blaze to develop. Preventing workplace fire loss requires knowledge of both the underlying ignition risks and the possible reasons for the rapid spread of fire,” said Mr Redington.

Grenfell Tower fire highlights importance of loss prevention

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