The insurance sector is seeing an increase in Residential and Commercial Properties that are being constructed under what is classed as Modern Methods of Construction. But what does this term mean and how does it affect a policy holders insurance contract.
What are Modern Methods of Construction?
Firstly we need to understand the definition of standard construction under Property Insurance, a typical policy definition describes this as a property constructed from:
- Brick stone or concrete built and roofed with slates tiles metal concrete or sheets or slabs composed entirely of incombustible mineral ingredients and plastic roof lights
The term modern methods of construction (MMC) embraces a number of approaches involving off-site manufacture or assembly. The definitions of MMC have varied over the years but generally it is classed as involving:
- volumetric units: whole homes constructed in the factory as one or more fully finished modules and stacked in place on site
- pods: a single room, normally a bathroom or kitchen, constructed and fully finished in the factory
- panelised construction: factory-made wall or floor panels that are fixed together on site
- sub-assemblies and components: various pre-manufactured parts of the home, including roof panels and chimney
- site-based MMC: innovative methods used on site, such as insulated concrete formwork or thin joint blockwork.
One of the most commonly used materials in construction are Composite Panels. Composite panels are factory engineered panels used mainly for exterior cladding, partitioning, load bearing walls and roofing elements in a wide range of buildings. Panels are manufactured on a continuous lamination basis with metal facings – usually steel or aluminium – encapsulating an insulated core. This composition offers a high degree of stability, rigidity and excellent load-bearing capacity hence its growing appeal in the Construction industry.
Companies often cite reduced costs and improved profitability from using MMC, due to the time saving nature of its construction and with manufacture off site in factory conditions it is thought that maintenance issues and snagging process times will be reduced. The NHBC Foundation survey in 2016 found that 98% of medium to large housebuilders surveyed had used or considered the use of MMC and 44% of these advising this was due to reduced preliminary costs, improved cash flow and faster sales revenue.
The recently completed Wandsworth Crescent flats in London showcases the benefits of modular construction with a 27 storey block of flats fully finished within 2 years shaving off nearly 6 months of construction compared to traditional methods and reducing trucks to site by nearly 60%.Building under a controlled factory environment also helps to reduce liability claims as it is often safer due to improved access to the module and no adverse weather conditions.
But with these benefits comes an increase in risk for insurers throughout the construction phase and also once the property has been completed. One of the biggest risks to MMC buildings is fire especially while they are still under construction as insulating materials are exposed until the exterior and interior of the property are enclosed. The recent fire at Glasgow School of Arts during construction or the 2014 Nottingham University fire both show the perils faced during construction.
After construction is completed there is still the risk of fire and it is important that insurers and contractors work together to truly understand the make up of the building to ensure it is insured correctly and for the right amount. The varied types of MMC can also lead to issues in the event of a claim with modular construction being particularly difficult to insure adequately.
Imagine a block of student flats made up of individual modules stacked upon each other and a small fire/escape of water effects a flat in the middle of the block rendering the module a write off. In order to replace that unit the ones above need to be disconnected and craned out of position to allow access to the effected unit. It is vital that the insurance broker has allowed for an adequate rebuild figure to allow for the increased costs involved in accessing the module and that the alternative accommodation period reflects this aswell.
Building regulations were introduced in the mid 1980s to provide a set of goals that buildings need to meet which includes structural requirements and fire regulations. However, there is no prescriptive list of materials that must be used and current regulations offer a broad outcome of what buildings must achieve.
The government provides Approved Documents as an official explanation of how to meet the requirements of the regulations but again these are quite broad and multiple materials could be used to achieve the same outcome.
Building Regulations are primarily concerned with the protection of life, where as an insurance contract represents a guarantee by an insurer that it will pay for damages and losses caused by covered perils.
Compliance with Building Regulations does not guarantee that a building is of ‘standard construction’ or that it will be acceptable to Property Insurers, it is therefore vital that property owners know the construction of their property and that this information is provided to insurers to ensure cover is adequate.
An underwriter will take into consideration many factors when calculating terms for a risk. Properties that have been built using MMC or non-traditional materials create additional considerations for insurers, which will affect the cover they provide or terms offered within the insurance contract. For instance, what could look like a small of amount of property damage may result in the property requiring to be completely rebuilt due to the nature of its construction. They also need to evaluate if the increased risk means that additional requirements are required such as fire suppression systems or water cut off valves.
Insurance cover offered will depend on the make up of the initial property construction, the insulation and cladding used and it is vital that the correct information is obtained to ensure correct cover is issued.
In order to help with this process we have partnered with insurers who specialise in MMC and have a team of expert surveyors on hand to carry out site inspections and assess the construction where needed.
Exterior Cladding of MMC buildings has also been brought to the forefront, last years Grenfell fire and subsequent reviews on high rise flats lead to the introduction of new safety tests with 70 high rise blocks failing the new test.
Many Residential Blocks and Commercial sites were retrofitted with insulation to help improve their thermal efficiency and then had cladding fitted to weatherproof the building and also improve its aesthetic. In order to calculate the risk that the construction poses it is important that the property owner, insurance broker and insurer all understand the materials involved to fully assess the risk posed.
One of the biggest issue in the insurance market currently are Aluminium Composite Material (ACM) Claddings as it is difficult to ascertain their construction especially several years after they have been installed.
Essential ACM comprises of 2 thing sheets of aluminium bonded to a 4mm core, there are typically three types of core which have varied fire resistance:
- Polyethylene (PE)
- Fire Retardant Core – 60-70% Mineral Based
- A2/Limited Combustibility Core – 90% Mineral Based
The ACM is fitted to an outer rail system behind which sits the main building insulation that has been fitted to the original fabric of the building.
A typical wall build -up with ACM Cladding:
The underlying insulation can also be made up of a variety of materials which further adds to the complexity and highlights the potential for error and why the fire tests following Grenfell are not as straight forward as it is commonly believed. The most common types of underlying insulation used on Residential Properties are:
My property uses ACM Cladding, what should I do?
Following the government review high rise blocks over 18m in height have been tested for the presence of ACM Cladding and what materials were used in its core and the underlying insulation on the building. If your property has been found to contain non compliant insulation under the new safety regulations there are several risk mitigation steps you can take while awaiting new cladding to be fitted.
We would recommend that you inform your insurance brokers or insurer immediately so they are aware of the issues and also take the following precautions:
- Notify the fire and rescue service
- Engage with residents to ensure they understand the emergency procedures and interim measures
- Advise residents to report concerns regarding maintenance and housekeeping
- Check fire procedure notices are accurate
- Survey residents regarding ability to evacuate
- Check all Fire Doors
- Check that, at ground level and any balconies, there are no combustible materials in the vicinity of the cladding
- Prohibit barbeques on balconies
- Check fire stops in walls and risers
- Check that any smoke control facilities are operating correctly/not undermined
- Check all facilities provided for Fire Rescue Service (dry/wet rising mains and fire-fighting lifts)
- Check roadways and hard standing for Fire Rescue Service appliances
- Ensure that there are adequate smoke alarms in rented flats, and that leaseholders are advised of need
When is a Brick building not standard construction?
The use of varied materials can make identifying construction of properties increasingly difficult especially if brick slips are used which provide the building with the outside appearance of being built from traditional methods.
Brick slips are thin slices which are typically cut from brick but can also be concrete or plastic, which are laid over the top of rendered insulation, again it is vital the property owners are aware of this and that full details of the underlying insulation is provided to insurers.
Clarke Williams have ensured we only work with industry leading experts to assist our clients and can provide referral into Fire Protection Companies and Chartered Surveyors to ensure our clients have the right protection and can meet insurer requirements. We can also conduct site visits to provide in depth risk assessment which can help to lower your insurance premiums and provide peace of mind that the full details have been passed to insurers.
Unfortunately, with all the will in the world, Commercial Property Insurance and Residential Property Insurance claims will happen. All insurers will have their own claims procedures, but below are a couple of things you can do to make the process as quick and stress free as possible!
Once you have received details of an incident from your client or employees, you should contact your broker (preferable Clarke Williams Ltd) to notify them of a possible claim. Even if you only have limited details it is always best to notify your insurers immediately.
Once you receive the invoice for repairs from the hirer, you will need to send this and following to your insurance broker;
- Full description of the incident and copies of any correspondence received
- Details of any remedial actions taken or proposed
- Full listing of any costs incurred
- We can cater for all modern methods of construction and provide expert advice on risk mitigation.
Providing your insurer gets all the above documentation and there are no other underlying issues, your insurer should be able to process the claim and appoint a loss adjuster to approve your claim.
Need a quote for a Property Insurance built with Modern Methods of Construction?
We can cater for all modern methods of construction and provide expert advice on risk mitigation. Using our carefully selected panel of specialist insurers we are able to cover:
- High Rise Blocks of Flats with cladding
- Commercial Warehouses
- Cold Storage Depots
- Modular Student Blocks
- Properties with MMC extensions
If you would like to see what options are available, give us a call. Our service includes the following:
- A no-obligation review of your insurances
- Identification of any gaps in cover
- Help you to arrange a policy that meets your needs
- Answer any questions you may have
- Comparison of insurance quotes & cover from multiple insurance companies (we’re independent so not tied to any insurers
- Availability of instant cover
- If there is a better deal out there, we’ll tell you. You can still transfer your insurance to us and try out our service
- Option of face-to-face, telephone or online communication
- Ongoing one-to-one support throughout the year
- We’ll be here to help if you need to make a claim
For a no obligation quotation from one of our Property Insurance experts please call us on 01732 252898 or email email@example.com