Meeting timber construction insurance challenges

Timber construction is on the rise in the UK, as many organisations make a move towards reaching net zero targets. Here, Mauro Bono, Technical Director in Structures shares his own thoughts on the challenges that are currently hindering insurance provision for timber construction, particularly if mass timber is used.

Why timber?

The overall consensus is that increasing the use of timber in construction can help reduce carbon consumption and make it easier to achieve net zero carbon targets. After all, it’s a sustainable and renewable resource that can be used in a variety of construction projects.

What challenges are insurers facing?

Whilst many insurers support the increased use of timber and its contribution to the reduction in carbon, they also need to consider the level of resilience of timber buildings, that eventually informs their decisions.

Insurance providers have to evaluate risks and damages in the buildings they insure. This is a combination of both material damage to the building and its content, and the cost associated with the unavailability of the venue affected by the damage for the time necessary for repairs – for example, loss of business continuity or alternative accommodations for residential users.

Different insurance companies may have varied approaches to assessing risk and damage, but we can summarise the complex procedures in two parameters that are particularly significant: 1. Worst-case scenario and, 2. Expected maximum loss for that specific event.

1. Credible Worst Case (CWC) – These scenarios are used to identify events that will cause damage to a building, with consideration to their probability to happen, in relation to the size, content, occupation, and location of the building.
2. Estimated Maximum Loss (EML) – This is a key parameter for all insurers as the most common figure used to define the insurability of a building. To understand the meaning of this parameter, consider a 10-storey building and assume that during a significant fire event, the floor where the fire happens will be totally damaged, that the two storeys above will be damaged by smoke, while the floor immediately below will suffer extensive damage caused by the water used to quench the fire. The result is the loss of 4 floors of 10, which is an EML equal to 40%. If for any reason the insurance provider cannot be convinced of the limits of the damage extension for an event, then they might have no other option but to assign an EML of 100%

For timber buildings, the main risks, from an insurance point of view, are fire and water. Large fires are rare but immensely costly events. Water damage events are less costly but more frequent and result in larger aggregate costs. So, it should come as no surprise that some insurers are more concerned about water related events than fire.

It is important to be aware that both parameters (CWC scenarios and EML) can be heavily affected by the design strategy and the choices made during the design process.

The limits of building legislation

Building regulations and design codes are mainly focused on the perspective of life-safety, rather than asset protection or damage control. Up to now this was not perceived as a shortfall because of the prevalence of non-combustible materials in large buildings, principally steel and concrete, with inherent resilience capability.

With the desired increase in the use of timber, adopting a code-compliance only approach is becoming increasingly insufficient for buildings insurers and the importance of embedding protection measures during design, construction and operation, is becoming increasingly significant.

Insurers need to give consideration on property and business continuity protection, as well as overall resilience to fire and water damage. Simply complying with building regulations and design codes (usually the goal of us designers), is no longer sufficient for insurers and clients. At the same time life-safety and pursuing acceptable levels of property/business protection must inform the design and the construction.

Although life-safety objectives are required by law, asset protection targets are entirely voluntary, and insurers recommend that these voluntary objectives should be determined at the early stages of the consultation process with key stakeholders and translated into design criteria and performance targets.

Voluntary objectives can be expressed, for example, in terms of structural or fire safety (including the ability to spread fire within a compartment to limit damage by increasing the fire resistance beyond the minimum statutory requirements), business continuity (limiting the extent of damage and recovery time below a critical threshold), or as an insurance requirement (damages must be contained below the agreed EML)

What is the role of designers?

The need to consider asset protection (or damage limitation) criteria in addition to the life safety requirements calls for a change from a simple code compliant to a performance-based design.

As structural engineers, we normally design buildings that can withstand certain “extreme” events without collapsing. This is what we call, the Ultimate Limit State. We also give limited consideration to the normal use of buildings in what we call the Serviceability Limit State, but our main focus is normally on limiting deflections to avoid damages to the finishes.

The level of performance for insurance purposes is very different from the level we typically use in our structural assessments. However, we have all the tools needed to fully understand the principles and implement the performance-based design process that insurers need.

The criteria used in the seismic design and, similarly, in the design against intentional explosions, are very similar to those described for insurance: define an event in terms of magnitude and probability of occurrence and the level of damage acceptable for that specific event. These concepts are very close to CWC Scenarios and EML.

Do we need to consider changing our design process?

For timber structures the short answer is yes.

We need to consider changes in the design framework and programme, since fire safety, water protection, acoustic requirement, durability considerations, and detailing will all affect the size and shape of the structural members and must therefore be addressed and taken into account at the early design stages.

But we also need to consider changes in our design approach and criteria to include in our design all those elements that may influence the choice of the CWC scenarios and reduce the EML – for example, including damage repair strategy in our design criteria. Early conversations with insurers are necessary to understand not only how to reduce the EML and increase the insurability of the building, but also how to demonstrate and prove this to insurers.

Right now, only limited guidance is available, and I highly recommend reading “The Mass Timber Insurance Playbook: A guide to insuring mass timber buildings” that has been my source of inspiration for this article.

Sweco engineers are pioneers in structural timber – we benefit from the unique shared experiences in timber projects already completed, including high-rise buildings, with a particular focus on structural engineering, fire engineering, acoustics, sustainability, wellness and construction.

To this end we have established an international and multidisciplinary internal workgroup called Timber 360 to advise with confidence our clients on any aspect of the use of timber in buildings, for projects anywhere in the world and from any Sweco office.