In recent years there have been a number of large losses for cold storage facilities which were manufactured out of expanded polystyrene foam (EPS). Regionally the two larger losses occurred in South Australia and in Queensland causing millions of dollars of damage. New Zealand hasn’t been exempt from these losses either with a recent fire in Christchurch resulting in a total loss of a Sandwich Panel Facility. These claims have highlighted the combustible nature of EPS insulation and the level of damage that can be caused, something that European insurers have been well aware of since 2001 after massive fires throughout the continent wreaked significant damage and resulted in a number of deaths.
In New Zealand we are continuing to see our local insurers either decline to offer terms or reduce capacity available for EPS constructed risks due to losses incurred and these insurers are continuing to shift more of the risk to global reinsurers. Reinsurers are also reducing capacity for these programmes and increasing rates to ensure appropriate premium is received.
Because of these complexities, large facilities made of EPS will require co-line support from local insurers to fill 100% capacity of their risks. It will always be our recommendation at Runacres to continue co-line insurance on a high-risk programme as it ensures stability in coverage compared with movement of appetites from a single insurer which may change frequently and could therefore leave a client suddenly exposed with no market. Co-line coverage also gives the benefit of support and history with multiple insurers allowing rapport to be built between parties should increased coverage be required in the future.
Polyisocyanurate constructed facilities (PIR) are not exempt from these struggles but we are seeing premium relief & greater capacity available compared with standard EPS risks due to PIR having fire resistant materials in the construction.
Risk Management procedures become critical when dealing with Sandwich Panel Buildings. Facilities with Sprinkler Systems continue to be the preferential option for insurance companies, in particular for risks with high hazard materials. Data from the main insurers show that the likelihood of a complete constructive total loss for a building with a sprinkler system that suffers a fire are in low single digit percentiles, making them an attractive risk.
At Runacres Insurance we have specialist brokers with a wealth of knowledge in the sandwich panel industry ready to assist and provide bespoke advice to property owners. Get in touch with us today to find out more!
