High rise buildings and fire insurance policies
Sep 19, 2016 – Though innovative tall buildings are being erected in Sri Lanka using more sustainable construction methods and having improved energy performance, sometimes, important insurance considerations are being overlooked. Fire risks may be increasing with the use of combustible modern construction materials and methods.
With modern methods of construction emerging all the time, many offering cost and time savings during construction, those designing these new high-rise buildings are left with a lot of scope as to how to solve certain technical and design problems.
But as the drive towards more sustainable, energy-efficient construction gathers pace, risks, especially around fire, may be increasing Skyscrapers of all shapes and sizes are currently either proposed, approved or under construction in Colombo. And it is not just Colombo that is set to see its skyline change forever, with an increase in tall buildings also planned for the rest of the Sri Lanka.
The pace of build and style of some of these new high-rise developments is pushing the boundaries of our knowledge in terms of risk management, .
Building regulations and design codes don’t always cater for buildings of the size and complexity we are now seeing proposed. Developers are trying to push boundaries all the time. Mixed occupancy developments, combining, for example, retail, office space, residential and hotel accommodation within the same building are increasingly common. Each of these occupancy types has its own requirements and brings its own challenges in managing risk ”
Buildings are primarily designed to satisfy regulations, which are aimed at ensuring the safety of occupants and making sure there are suitable means of escape. If there is a fire, what happens after the building has been evacuated is very often ignored – it is left to the building owner and their insurer to pick up the pieces. Tenants may simply relocate elsewhere and never return. Assuming the building can be repaired or rebuilt, increased costs will then be incurred in finding new tenants.
“Using combustible materials can not only increase fire risks but also add to long-term insurance costs. And if something becomes difficult or expensive to insure, it may well also impact on its market value should a property owner want to sell it in the future.
Modern construction methods, such as timber-framed buildings, modular construction and ‘green’ insulation materials used in cladding systems, which are often combustible, are becoming more commonplace in high-rise designs to reduce costs and satisfy energy performance.
However more joined-up thinking is required on the use of some of these materials, especially in tandem with each other, as many pose additional fire risks.
Fire engineered solutions, which use active fire suppression systems to reduce internal compartmentation, can also increase the risk as they rely on the active systems to always be in service and to operate exactly as planned if the emergency occurs – experience demonstrates this is not always the case.
Using combustible materials can not only increase fire risks but also add long-term insurance costs. And if something becomes difficult or expensive to insure, it may well also impact on its market value should a property owner want to sell it in the future
High rise buildings, which have a large number of individual tenants, are far more likely to have building alterations and refurbishment works taking place at any given time. Fire protection systems are typically taken out of service temporarily to allow these works to take place, leaving these floors unprotected at a time when the building is potentially at its most vulnerable. This can be a major concern if the works are not safely managed,” cautions Brian.
Most insurers classify a high-rise building as one that is over 23 metres in height, which is the accepted level most fire brigades can reach externally.Above this, the only way to deal with a fire is to go into a building, which is far more complicated and dangerous.
As buildings become taller and more complex in their operation, any problem which occurs, such as a fire, potentially becomes that much more serious and more complex to deal with.
However, thankfully the majority of tall buildings are well designed and constructed and are perfectly safe.
The first skyscraper in the world was built in Chicago. It was the Home Insurance Building. It was built in 1884 and had twelve stories.
For owners of skyscrapers, it is not easy to shop around for insurance. It needs thorough research and guidance from insurance and reinsurance brokers. It does not come cheap. It will cost a pretty penny.
The first thing that an owner of a skyscraper has to be aware of is the Skyscrapers and Decennial or Inherent Defect Insurance clause. In many countries, there is an exclusive liability clause which is attached to the construction phase.
The parties involved in the construction of skyscrapers like the architects, the contractors and the engineers will have a liability that lasts usually for a decade in terms of structural defects in the construction. The Petronas Towers in Kuala Lumpur were the first to get the IDI coverage and even that has expired as the building is now over ten years old.
The insurance challenges for a skyscraper as a commercial liability are defects in the structure over a period of time, the height and wind impact, earthquake, floods, corrosive groundwater and fire. Most of the skyscraper projects for owners are insured against the traditional ‘Construction Cover for All Risks’. Often, they are on a specific project basis including the defects or maintenance liability period. This is non-renewable and non-cancellable.
The skyscraper cover is generally issued in accordance with the conditions of the contract requiring the policy to be issued jointly in the names of the owner and the contractor as the principle and secondary parties. In some cases, all project aspects are covered under one single policy and this can include occupiers and tenants.
Each underwriting risk is treated individually. New techniques and innovative combinations of materials are giving way to new kinds of exposures. The full project value is broken down including the construction bar chart with an overview of exposure to natural hazards or force majeure events like earthquake, floods and storms. A description of surrounding properties is taken for the purpose of third party liability which is essential apart from the main structure commercial liability. The fire safety plan is also important.
For owners of buildings, their primary asset is the building property itself. While most building owners cannot control the activities that occur inside of their property, except those that are governed by the terms of a tenant’s lease, they can protect the structure of a building itself. Commercial insurance coverage for rental value may also be important to apartment building owners who want to protect their business’s ability to retain cash flow in the event of economic loss.
Besides coverage for an building itself, owners may want coverage for business personal property, the personal property of others, and for improvements and betterments on site.
Builder’s risk protection, legal liability coverage, ordinance or law coverage, and other kinds of business insurance coverage may also appeal to owners of apartment buildings, depending on their particular needs when it comes to commercial insurance.
An independent insurance Broker Like us will likely ask building owners about a rental property’s fixtures, any permanent machinery installed on the premises, equipment housed in an apartment building, and any machinery or equipment used to service the property, including cleaning devices, stoves, and refrigerators.
Likewise, with our years of expertise are familiar with the concerns of building owners when it comes to purchasing quality commercial insurance may inquire about trees, shrubs, and plants on the outdoor parts of the property, the estimated replacement cost of goods on the premises, and the business income of an apartment building owner’s company.
In the process of choosing an apartment building insurance for owners and landlords, there many factors to consider. Depending on the size of their property, its location, equipment stored and used on site, and other similar elements, different apartment buildings require different kinds of business insurance coverage.
By reaching out to an experienced local independent insurance agent, rental property owners can discuss their concerns when it comes to purchasing commercial insurance coverage and obtain quotes for comprehensive policies from a variety of insurance companies.
When buying business insurance, obtaining quotes from different insurers can serve as a valuable tool for property owners.
Insurance companies have varying criteria when it comes to issuing commercial insurance policies, and securing quotes from a number of potential insurers means that property owners can find coverage suited to their company’s unique coverage requirements.
Being a licensed independent insurance broker, we are familiar with the concerns of apartment building owners when it comes to adequately protecting their business’s property and assets, will guide them through the process of choosing a commercial insurance policy.
Business owners can get a quote before they apply for business insurance. A quote serves as an estimate of the price of a commercial insurance policy. Building owners seeking to purchase commercial insurance coverage should always use an independent insurance broker like us to obtain a quote from any of the insurers.
Then, with quotes from a number of insurance companies, apartment building owners can evaluate the available options for coverage in each potential policy, and select the proper commercial insurance for their rental property business.
In the course of gathering information from an apartment building owner in order to develop commercial insurance quotes from insurers, an independent insurance agent will likely ask about a rental company’s business property risks, such as the estimated replacement cost for a business’s apartment building property, along with the equipment and machinery maintained on the premises, and any fixtures or improvements at the facilities.
Provide Comprehensive Building Information
The agent might ask about projected rental income and any recreational facilities on premise. He might ask about the number of rental units and request a financial statement. He might also ask about any contractual agreements including loan documents.
Using these and other factors, we can secure quotes from numerous insurance companies in order to provide options for commercial insurance policies tailored to a unique apartment building business.
By working with a seasoned independent business insurance to acquire quotes for commercial insurance coverage, apartment building owners can develop an understanding of their property’s unique business risks, along with their organization’s assets, including, primarily, an apartment building structure, itself.
Owners of high rise buildings can purchase commercial insurance to safeguard their property and assets in the event of an unexpected accident, injury, or loss.