risk insight, strategy and control authority reducing insurable risk through research, advice and...
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RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Chris HanksFPA and RISC Authority Chair
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
The Insurer’s View
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Introducing the FPA and RISCAuthority
Mission is to identify current and future issues that may
detrimentally affect UK property Insurance and to
manage and mitigate the consequences.• Provide text that underpin current insurer fire
protection• Make fire protection financially and technically
attractive to the insured property owner• Focal point for all stakeholders interested in fire
protection• Encourage commonality with government policy
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Supported by 85% of UK Property Insurers
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
And maybe Insurers have to get their “skin in the game”
• Insure £20 trillion of Property Assets• There are NO property assets in the UK WITHOUT Insurance• For a £10m value building we charge £4k premium and 50% of that
goes in Brokers or Managing Agents Fees• A capital intensive business for every £100 of turnover we need £50 of
capital.• We exist on a margin of 3%• We rely on history, fact, knowledge and experience to inform the risks
we take on• We rely on most clients not making a claim. This is not a savings
account but where the losses of the few are shared by the many
Change and Uncertainty are our nemeses
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
But don't cry for Insurers!
Long term we will not lose money or waste and destroy
our capital.
But the consequences are:• We will raise premiums very significantly• Refuse to provide cover for some buildings, some
types of construction, some trades, some areas etc• Exit the market
None of this is necessary if we work collaboratively and sensibly together
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Welcome Reduction in Number of Fire Claims
2004 2005 2006 2007 2008 2009 2010 2011 2012 201320
40
60
80
100
120
140
Commercial Claims
Total Claims
Year
No
. o
f C
laim
s (0
00s)
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
But Financial Losses Remain Stubbornly High
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013400
500
600
700
800
900
1,000
1,100
1,200
1,300
1,400
Commerical Fire Claims
Total Fire Claims
Year
Gro
ss I
ncu
rred
Cla
im (
£M)
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Factors Affecting Size of Loss• Changes in the Built Environment
• Larger buildings,• Greater use combustible materials
• Loosening regulatory environment• Fire (Value) Engineering• Loss of Local Building Acts
• Changes in fire and rescue response• IRMP• Tightening fiscal environment
• Unwelcome bias towards life safety and evacuation over
property preservation and economic recovery
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Emerging Issues
Timber Frame Waste and Recycling
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Emerging Issues
10
Many modern building techniques use a great deal of combustible material in their structure
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Green credentials over fire performance?
11
Emerging Issues
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
FPA ‘Building of the Year’
• Non-combustible materials of construction (properly ‘non combustible’)
• Excellent compartmentation
• Little or no reliance on ‘systems’ (human or mechanical) to deal with fire
12
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Challenges to Resilience in the Built Environment
• Fire (Value) Engineering• Budget constraints on Fire and Rescue Services• Call challenging of AFA’s• Repeal of fire safety provision from local acts• Void buildings / social unrest• Reduced Inspection (Fire Certificates)• Low sprinkler provision in comparison to our EU cousins• MMC (Combustible structures, insulation, cladding, voids)
Resilience requires good decision making and reduced reliance on others
13
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
And what are Key Stakeholders doing about this?
Firstly who are these Key Stakeholders?• The Government and Regulators• Insurers• Fire Protection Industry• Sprinkler manufacturers and Installers• Fire Authorities• Architects, planners• Company Directors, business owners and property owners
Look at the first 2 categories and focus more specifically on the role of Sprinklers
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
The Government’s Role
• They do not participate!
• Sprinklers in buildings over 20,000 sq m (big deal)• Local Acts now removed – so no help there either• Reducing regulation to encourage low cost building
• Their remit stops at evacuation – there is no further interest in how the building, environment, business, or community suffers beyond this point.
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
The Insurer’s Role
• Obvious vested interest• Provision of tools to support the enlightened• Provision of expertise to support the enlightened• Favourable terms for better risk but wimpish in
penalising poor risks
But:• It can be a hard-sell• Open competitive market with surplus capital means
short term options for clients to move• Portfolio cover
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Why Do Insurers Like Sprinklers?• Reliability – few sprinklered buildings appear in the
large loss statistics• Trust
• Tightly specified standards• Third party certificated equipment• Highly qualified installers• Robust maintenance schedules
• Risk• Proven Technology (Victorian Engineering?)• Resilient
• They save insurers and their customers money
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Sadly and Increasingly Insurers Confidence is Falling
• Deviations from insurer rules• Watering down of standards
• Value engineering• Claims of equivalence with alternative technologies
• Test performance is no guarantee• Equivalency – Performance & Reliability
• Confusion between life safety (evacuation) and property protection (building resilience) standards
• No other form of fire suppression has the history or performance of sprinklers
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
What about the Other Stakeholders
• Despite many good intentions, improved collaboration with CFOA etc, there are too many vested interests and too little collaboration and too many obstacles in the way of significant improvement in current situation
Insurers believe that:• There needs to be more Sprinkler protected properties in the UK• We need to make sure that protection is appropriate not just arbitrary• We need to overhaul some of the costs and problems associated with
Sprinkler installations • We need to Government to force appropriate sprinklers into large
commercial premises• We need a sensible an collaborative dialogue amongst the
stakeholders to achieve this
So we are making some proposals
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
Collaboration for Resilience
• A new gold standard • Recognised rules for protection of property• Insurer led – but involving stakeholders
• trade, end-users, enforcers, certification bodies etc
• Pan European• Defined timescale• Offered to CEN
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
RISCAuthority - Blue Skies Group
• Explore measures to increase palatability of sprinklers without detriment to reliability
• Determine scope to introduce alternative measures• Insurers, trade, regulators – facilitated by FPA
• EG – Provision of underground tanks
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
So what does this all mean?
• Reduction in number of claims• Steady rise in aggregate cost and much larger claims• De-Regulated Environment• Changing risk landscape• Competitive insurance market• High level of trust in sprinklers• Concern at claims of equivalence
And we are proposing some change
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
We are proposing 2 New Initiatives
• New Property Protection Standard• RISCAuthority Blue Skies Group
If we believe we need to improve the built environment
in the UK and that Sprinklers are an obvious part of
the solution then the question is
IF if we are not going to do this, WHO IS?
IF we are not going to do this now, then WHEN?
RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY
Reducing insurable risk through research, advice and best practice
London Road, Moreton In Marsh , Gloucestershire GL56 0RH
T: +44(0)1608 12500 F: +44(0)1608 812501
E: [email protected] www.riscauthority.co.uk
Thank you
Chris Hanks
All guides and documentation referred to freely available from
www.RISCAuthority.co.uk
https://robust.riscauthority.co.uk/
www.theFPA.co.uk