Spotlight: Emerging risks in the property sector

The property sector faces a number of long-established risks from storms and floods to subsidence and fires. However, new risks are emerging all the time and the insurance industry must make sure customers are aware and are prepared to face them. Tim Evershed reports

 

Battery fires

Among the main emerging risks in the property sector is lithium-ion batteries, according to Colin Thompson, senior risk engineer, major risks, at broker Gallagher.

“Lithium-ion batteries power cars and buses and lorries, but the big one that keeps catching fire right now are forklift trucks and the vehicles that people use in factories to move products around,” he says.

“What is happening is they are just taking out the previous chargers, putting new ones in and thinking it’s the same. It is not, it’s a different risk and you need to consider it differently.

“When there’s a new risk, all the insurers look at it from different perspectives and gradually they come together to form an industry consensus. That eventually becomes standard practice and is just what happens.

“Currently we’re at the coming together phase. There is guidance produced by the insurance industry on lithium-ion batteries and charging at the moment, but different insurers still want different things. As brokers we try to understand what a particular insurer wants and what the customer is doing is acceptable to everybody.”

With many cheaper replacement parts available online, it can be tempting to save some money but, ultimately, you might pay an even bigger price.

Luke Barnet, NFU Mutual

The Fire Brigade advises that electric vehicles should be charged outside and away from buildings, so if they do catch fire they don’t damage the property. A forklift truck on charge needs to be somewhere where the Fire Brigade can access it and put a fire out.

The risk also requires education of insureds and the general public as well as investment in risk management teams.

Luke Barnet, home underwriter at NFU Mutual, says: “We conducted a survey last year which found that eight in 10 people charge or store their battery-powered devices in a way that increases the risk of fire, so we know there are simple measures customers can take to keep themselves and their property safer.

“This includes avoiding buying third-party batteries or chargers, charging devices away from soft furnishings or direct heating, keeping larger items away from entry and exit points, and not using chargers or devices with signs of damage. With many cheaper replacement parts available online, it can be tempting to save some money but, ultimately, you might pay an even bigger price.”

Solar threat

Amid a general social trend towards more environmentally conscious energy consumption, interest has grown in installing solar photovoltaic (PV) generation systems on domestic and commercial buildings. However, the reported increase in fires involving solar PV systems has highlighted a growing exposure for property owners who have fitted or are considering fitting these systems.

The majority of PV systems on domestic and commercial buildings tend to be rooftop installations. 

While fires involving PV systems are still relatively infrequent, the recent uptick in incidents is focusing minds on this emerging property risk.

The data we have suggests solar PV panels are no more likely to have a fire than any other electrical equipment. The problem is that if they do they are difficult to control and can be catastrophic.

Colin Thompson, Gallagher

Thompson says: “The big risk with solar PV panels is on roofs. That was where it was like the Wild West, with everybody just whacking them in, you had equipment of dubious quality, installed by dubious companies. That’s now sorted out and we have approval standards for the equipment and more professional people moving into it, but they don’t tend to be considering the risk.

“There’s limited data on emerging risk, but the data we have suggests that solar PV panels are no more likely to have a fire than any other electrical equipment. The problem is that if they do they are difficult to control and can be catastrophic.”

There are now standards from the insurance industry for solar PV panels, which are just coming into place.

The industry says it is vital for it to be involved early in conversations about installing solar PV panels on rooftops. One issue is the placement of power switches near to the panels in the rooftop close to where any fire will be burning. Then it is possible to install remote switches that the Fire Brigade can use to kill the power from a safe distance, or even attach the switch to the fire alarm. If a call button is pressed on the fire alarm it will automatically turn the panels off.

Thompson says early interventions are often cost-effective and, on some occasions, when made pre-contract can even end with safety tweaks that cost nothing.

John Mellon, head of risk management solutions, GCS asset classes, at Aviva, says: “The key to understanding this risk is education. It is important to ensure that all risk assessments include this addition and that appropriate management controls are in place.

“Due to the nature of the exposure, it is critical that ongoing inspection, testing and maintenance is completed. The latter can be – and often is – overlooked. If not included in the original cost benefit assessment, it can impact the ongoing viability of the installation. This is especially true if there is no permanent roof access.”

Terrorism protection

Also on the horizon is the Terrorism (Protection of Premises) Bill, which is expected to be introduced next year.

The Bill will enhance the protection of publicly accessible places from terrorist attacks and, for businesses within scope, to be adequately prepared to deal with such a threat. The changes will require proportionate steps to be taken, depending on the size and nature of the activities that take place at the premises.

Lucy Dennison, legal director, DAC Beachcroft, says: “The Terrorism (Protection of Premises) Bill, widely referred to as ‘Martyn’s Law’, featured in the recent King’s speech, confirming the Labour government’s commitment to the new law in its legislative agenda. The Bill will impact insurance products in terms of existing property and terrorism cover, but lines of business such as directors’ and officers’ coverage may also be affected.

Any insured should try to discuss their change proposals or risk management concerns with their broker and their insurer at the earliest opportunity

John Mellon, Aviva

“Whilst the previous version of the Bill stated that nothing in it ‘…confers a right of action in any civil proceedings in respect of any contravention or a requirement imposed on any person …’, there is likely to be an impact on liability insurance as a result of shared obligations and responsibilities introduced by the legislation.

“Insureds operating qualifying public premises or events open to the public should discuss their insurance needs with brokers and seek assistance to ensure compliance with the standards to be introduced.”

It is important to bear in mind that emerging risks in property are also opportunities to better understand how insureds can mitigate risks and improve resilience.

Mellon concludes: “One business’s emerging risk is another’s embedded risk. The key is creating awareness, careful management of the change that introduces a ‘new risk’, continued diligent management controls and education throughout the life cycle of the exposure. The bigger risk is if a new hazard is introduced without appropriate understanding, management visibility and control.

“Depending on the nature of the risk, any insured should try to discuss their change proposals or risk management concerns with their broker and their insurer at the earliest opportunity. This will then allow all parties to be joined up in seeking a cost-effective solution that works for everyone. That should always be the aim.”

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