Obtaining insurance for a timber building can sometimes be a challenge. Kate Fairhead, Head of Mass Timber for Construction at specialty insurance broker Marsh provided us with valuable insights into how insurers perceive timber buildings at this year’s UK Timber Design Conference. She also explained how best to engage with an insurance broker for a timber project.
While timber buildings are still often perceived as risky by the insurance market, Fairhead has noted some major progress in the last few years. The insurance industry has been responding to clients’ desire to build with timber, and the construction industry is responding to insurers’ concerns.
“Insurance is now frequently being considered at the design phase of timber buildings,” Fairhead says. “This is very refreshing because with most other buildings, it is thought of last – sometimes just a few months before starting onsite.”
A risk-management approach
The fact that a risk-management approach is increasingly being brought in at the infancy of projects is very beneficial to all parties. Fairhead explained: “From the insurer’s point of view, a risk-management approach is essential because timber projects – whether lightweight or mass timber – are associated with greater risk. This perception is not likely to change any time soon.”
So addressing the key risks is an imperative, as is providing evidence that your project is taking steps to minimise them.
Key risks from the insurer’s perspective
- Fire is considered to be the most likely cause of a total loss in developments. With mass timber considered a combustible material, insurers are concerned about the increased likelihood of such a loss occurring.
- Water is another major risk. Unintentional exposure to water can severely impact timber, either through diminishing its structural integrity, discolouration impacting the building’s aesthetic, or mould leading to air quality issues.
- Supply chain dependence: With certain key suppliers, insurers are nervous about potential delays to programmes and, more importantly, any delays in securing replacement material following physical loss or damage. This could have a large impact on a claim value, especially if ‘Delay in start-up’ coverage is purchased.
- Repairability: Insurers often do not understand what the consequences of physical damage could be when it comes to timber. Insurers do not know how complex or expensive repair on site might be, or even whether it’s possible to undertake repairs on site as opposed to replacement of a full panel or part.
- Serial defects: The extent of standardisation in offsite manufacturing of mass timber parts raises concerns among insurers over repeated defects throughout a building and increasing the cost of a claim.
- Product knowledge: There are of course experts within the construction industry with a high level of experience in mass timber, but there are concerns that when the specialists are off-site there is not enough understanding across trades onsite about how to ensure the material is protected.
- Sunlight and the building’s appearance: Exposure to sunlight can affect the aesthetic of the timber through discolouration.
Communicate and inform
Fairhead stressed the importance of communication to insurers: Explain all the positive risk-management actions you are incorporating into your project.
“Show them all the experience embedded in your team and how you’ve used best practice to realise this project across both the design and the construction. Make sure the contractors are on board too, employing the same risk-management approach to delivery.”
Being a global broker, Marsh has the advantage of learning from projects right across the world and seeing how they are navigating the challenges of building with timber.
“If a loss does happen, how is it repaired?” Fairhead asked. “It’s important for insurers to understand what happens as a consequence of loss or damage to a timber project. We have, regrettably, experienced some claims coming through, but we learn from them to ensure that future projects don’t suffer the same losses.”
Marsh’s extensive experience has been captured in its podcast series, The Rise of Mass Timber, which delves into the manufacturing process, developer perspective, and insurance challenges and opportunities of mass timber builds.
The Mass Timber Insurance Playbook
Kate cited the Mass Timber Insurance Playbook as an essential document in understanding insurers’ concerns about timber, and how they can be addressed. A free to access document published in 2023, it has already helped many to navigate the challenges of insuring on both the construction and operation of timber buildings. Kate summarises its key areas of development as:
- Risk assessment
- Resilient strategy
- Industry collaboration
- Early engagement
The insurance procurement strategy
“Speak to your broker and build up a clear procurement plan to getting insurance,” Kate strongly suggested.
You can access the procurement plan that Marsh would typically provide here. It’s immediately apparent that early engagement with the broker is key to this procurement plan. When insurance providers are selected, it’s the capacity deployed, risk engineering capabilities, coverage offered, and ability of the company to insure operational assets should all be considered.
Fairhead urged: “You should contact your broker about operational insurers as soon you have a concept of design.” That, above all else, is what she recommends as a priority.
Source: Advice from the insurance broker: how the insurance world sees timber : Timber Development UK
