Timber in Construction: Risk v Reward

The push for sustainability in construction and the built environment has led to the re-emergence of the use of engineered timber such as CLT and Glulam which has gained significant attention in recent years. In terms of tall buildings, steel and concrete have been favoured due to strength, durability and fire resistance. However, mass timber frames are back under the microscope. Timber is sustainable and renewable and so long as new trees are planted to replace those harvested, timber remains an environmentally friendly resource, especially when compared to other materials which rely on finite supplies and additional Co2 to produce. 

What are the benefits of using timber in construction?

  • Reduction in carbon emissions
  • Reduction in construction time
  • Produces less waste than steel
  • Is lighter than other construction materials and retains a high load capacity
  • Timber’s thermal efficiencies allow it to retain heat and thus reduce heating costs
  • Can be integrated into modern methods of construction.

How do underwriters view construction projects utilising timber?

Whilst insurers remain committed to their own sustainability targets, there appears to be a misalignment with the world of construction. Underwriters are not entirely sold on timber, mass timber or high-rise developments from a risk perspective. Whilst insuring a mass timber frame may be possible, it will no doubt have a more costly premium impact. Underwriters are nervous regarding combustibility/fire resistance from the moment that timber is delivered to site along with concerns regarding how timber holds up to water damage resulting from flood, weather or failure of internal water systems, especially prior to practical completion. The assumption amongst insurers is that once timber becomes impacted by the perils of fire or water, a total loss will be inevitable.

This has led to insurers appetite reducing for timber framed projects. With strict underwriting criteria and projects being reviewed on a case by case basis. Insurers appetite is minimal and whilst agreeing to provide small line sizes/capacity, they will potentially apply a higher rate, require higher deductibles and will often only participate on a scheme that is no more than 5 or 6 stories in height. Policy wordings may be endorsed with additional clauses pertaining to fire, water damage and security features.

So, in the case of timber – how do we reach a point of equilibrium?

In recent months and from the market engagement that we have undertaken to assist our clients, it is noted that more insurers are appreciating the need to be supportive of sustainable construction and appetite for timber use and mass timber builds are being considered within portfolios more freely than in recent years.

Some insurers will still only consider low rise commercial projects, however all are of the same opinion that it will take the entire insurance market to work collaboratively to provide solutions and all comment that they are only willing to participate where a full risk management strategy and survey plan are implemented from start on site.

Other factors to consider which may enable insurers to participate in a timber bias project, is compliance with the STAs 16 Steps to Fire Safety which promotes good practice on structural timber sites and adhere to The Construction Insurance Risk Engineers Group (CIREG) guidance (as a minimum). Appropriate and robust security measures should be implemented and be relevant to each stage of the build and insurers will want to see evidence of utilisation of fire safety expert’s advice.

Regarding completed and operational builds, consideration needs to be given to the end user being able to insure the property by maximizing non-combustibility in the build where possible and effective installation of sprinkler systems. Insurers will expect high standards of risk management and controls should be apparent beyond the construction phase.

Other risk factors for consideration on completed builds include basements and basement car parks, balconies and green walls, which enhances the combustible material of the external façade. Blue roofs, which hold rainwater can pose issues due to the potential to fail and cause catastrophic water damage to timber structures. Sustainable energy systems such as solar panels can pose a fire risk in the event of failure. Whilst not unsurmountable these are considerations that underwriters will want to see as being well planned out and the relevant mitigation factors being considered.

Summary

Timber is efficient and sustainable, but it does require extra consideration and good lead in time. We expect to see more use of timber and mass timber projects in the not too distant future,
Early engagement with brokers will be key to ensuring adequate protection for construction projects. If you have any questions about incorporating timber in existing or upcoming projects, please get in touch by clicking the button below and a member of our expert team will be in touch.

In our recent video titled What’s happening in the Construction Industry in 2022? our specialist Construction team reflect on 2021, offer their predictions for 2022 and discuss the use of timber in projects.

Construction Insurance Brokers, Emma Snelson and Gina Charles are delighted to attend MIPIM 2022. If you would like to meet up to discuss any risk or insurance issues, please contact Gina or Emma either through LinkedIn or via email.

Emma Snelson & Gina Charles | Griffiths & Armour