Most corporate insurance managers will be focusing on how, if possible, to call on their liability coverage to help their company through the current pandemic, but they also need to act on the property risks posed to their mothballed production facilities and industrial plants or face some potentially nasty surprises, warns Allianz Global Corporate & Specialty (AGCS).
“Many companies are having to shut down their premises temporarily at short notice due to the Covid-19 pandemic. Improper action or negligence when decommissioning buildings and production facilities brings risks for companies. Mothballed factories or offices are by no means safe from fire or other hazards – in fact such risks can be exacerbated when premises are idle or largely unoccupied,” points out AGCS in its new report: Coronavirus: Safety Measures For Businesses Forced to Temporarily Close Their Premises.
In the report, AGCS experts provide an overview of general security and prevention measures to help avoid physical damages, such as regular checks of fire protection systems and the safe storage of flammable materials and liquids if premises have to be shut down. AGCS says it is also increasingly providing security advice to its customers via remote monitoring technologies that digitally visualise buildings and security features through photo and video recordings without the need for many people to be physically on site.
“We already see a number of losses that occur on holidays or weekends when employees are not largely present on sites or premises,” says Ralf Dumke, regional head of risk consulting property, AGCS central and eastern Europe. “The production and operating shutdowns currently being caused by the coronavirus pandemic can also bring increasing hazards for businesses,” he adds.
AGCS says that some of the industries most affected by the crisis are automotive manufacturers and suppliers, airlines, airport operators, mechanical and plant engineering firms and the hotel industry, though its advice applies to most large and small production and service companies.
“The potential damage caused by fire or as a result of inadequate maintenance remains, or even increases, when operations are shutdown. There are specific measures for loss prevention that can be followed in order to prevent damage during the shutdown of operational facilities as much as possible,” Mr Dumke says.
AGCS advises that, if possible, regular inspections and tests of fire protection systems should be continued because these can significantly reduce the effects of a fire. A recent AGCS analysis of loss events in the insurance industry shows that fires accounted for almost a quarter (24%) of the value of all insured events in industrial insurance over a period of five years. Fires caused insurance losses worth more than €14bn from about 9,500 claims during this period.
AGCS risk consultants focus on four main areas of loss prevention measures in the publication: reducing the risk of fire, safe storage of flammable materials and liquids, compliance with utility and services guidelines, and the use of best practices in building safety and maintenance.
The insurer recommends, for example, that companies consider regular checks of all existing automatic fire detection systems, sprinkler systems and fire pumps, and other existing fire protection systems, even if this is difficult in the current circumstances.
It also advises that highly flammable materials such as raw and finished goods, packaging, pallets, waste and flammable liquids located within shutdown buildings should be reduced as much as possible. Where this is not possible, a safety distance of at least 1.5 metres should be maintained between electrical equipment and any remaining materials, adds the insurer.
Another measure to consider would be to decommission all hazardous process and utility equipment, including pipes for flammable liquids and gases, says AGCS. “Depending on the specifics of the location, power to the premises should also be shut down, except where required for fire alarms, fire safety and security systems. Entrance and exit doors should be secured with high-quality locking systems, and interior and exterior lighting should be kept to a minimum, as necessary for inspection, security patrols and access purposes,” advises the insurer.
AGCS says that, despite the current restrictions imposed by the coronavirus outbreak, AGCS risk consultants are still available to provide technical advice to companies and are increasingly relying on new technologies to do so. “Of course, we can discuss idle-building scenarios by telephone or video conference and recommend improvement measures. We are also increasingly using remote monitoring tools such as MirrorMe,” explains Mr Dumke. Using photos and videos, remote risk assessments of factories or buildings can be carried out with the results then shared with the customer via a digital platform, explains the insurer.