Chris Hanks FPA and RISC Authority Chair

1. The Insurer’s View Chris Hanks FPA and RISC Authority Chair RISK INSIGHT, STRATEGY AND CONTROL AUTHORITY Reducing insurable risk through research, advice and best practice

2. 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

3. Supported by 85% of UK Property Insurers

4. 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

5. 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

6. Welcome Reduction in Number of Fire Claims

7. But Financial Losses Remain Stubbornly High

8. 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

9. Emerging Issues Timber Frame Waste and Recycling

10. Emerging Issues Many modern building techniques use a great deal of combustible material in their structure

11. Green credentials over fire performance? Emerging Issues

12. 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

13. 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

14. 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

15. 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.

16. 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

17. 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

18. 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

19. 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

20. 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

21. 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

22. 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

23. 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?

24. 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 London Road, Moreton In Marsh , Gloucestershire GL56 0RHT: +44(0)1608 12500 F: +44(0)1608 812501 E: info@riscauthority.co.uk www.riscauthority.co.uk