When new ways of construction pose a risk of ‘total loss’

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Modern methods of construction is the term given to emerging innovations, be it a new material or building method.

Commercially speaking, MMC makes sense and delivers a host of benefits, from time, cost and energy savings, to predictable performance and overall increased profitability. However, they can come with implications for the owner’s insurance risk and liability.

The insurance sector isn’t new to the risks posed by MMC, with many companies refusing to insure composite panels back in the early 2000s over fears related to combustible cores.

Although the fire resistance and quality certification of such panels has improved significantly over the past decade, the reality is that the appearance of modern methods and materials has also become more sophisticated, with realistic claddings and fascias making it more difficult to spot when buildings are of ‘non-standard construction’.

This in itself is a big challenge for insurers, brokers, construction firms, property investors and property managers, who can no longer assume and interpret from a photograph that a building is constructed in the traditional fashion.

So what is the real concern? With any building, MMC or otherwise, fire, weather and water damage remain the greatest risk factors. But with MMC, the specific nature of those risks and how the material will react to certain perils can change dramatically – potentially turning a small claim into a catastrophe – or, in insurance parlance, a ‘total loss’.

A few key examples include polystyrene cladding, insulated panels and timber frames, which are all flammable, as well as the increasingly popular ‘green roof’, which requires regular watering and can pose obvious flood risks.

The solution

There are simple guidelines to ensure the risk management and insurance solutions for an MMC property provide the right cover.

Take advice that is MMC-specific from a provider with expertise in this sector. Not only will they understand all the latest MMC news but they will be able to apply this knowledge where you need it most.

Talk to your broker at the design stage – and again throughout the construction process in case things change. Assist your broker in establishing a clear materials provenance for the building, which will ensure watertight insurance cover that won’t be found lacking at the moment of truth — when you need to make a claim

By addressing the risk management and insurance needs of a non-standard construction building, preserving the commercial benefits of MMC while removing the major risks needn’t be a sticking point.

To find out more, or to discuss your insurance and risk management requirements, email Steven Lunn on steven_lunn@ajg.com.