Ensuring your insurance strategy is sound

Climate change has the potential to create a variety of insurance risks for commercial properties, it is therefore important to have a robust insurance strategy in place, Paul Spaven investigates

2009-08-10

A good strategy should consist of two key elements; reinstatement cost assessment (RCA) and a plan for responding quickly when reinstatement is needed. The accuracy of a reinstatement cost assessment can have significant financial implications for real estate owners and occupiers. If over-insured you will be paying high premiums with no benefit.

RCA’s must include not only the rebuilt cost, but also the costs of demolishing the damaged remains, compliance with statute, planning and building permissions, professional fees and separate insurance will be needed for business continuity.

To achieve ‘Day One’ cover the RCA must be carried out by a professional who is able to:

• take accurate measurements of the premises;
• consider the methods of construction used and their impact on reinstatement work;
• utilise knowledge of regulation changes that would influence any reinstatement work; such as environmental, asbestos, access and current legislation

Responding to disaster Whilst it is impossible to predict when a disaster might occur and what nature it will take, it is important to be prudent and prepared. The two biggest risks to real estate comes from fire and water and unfortunately for property owners the largest incidents tend to happen at night when buildings are left unattended. It is then that small accidents go undetected and turn in to major problems.

It is important that when disaster strikes it is responded to quickly by someone who understands the insurance process and, building pathology and business planning. Speed is of the essence. Many reinstatement consultants will therefore offer a round the clock emergency number to make sure clients can have them on site as soon as possible.

Estate managers need to have the peace of mind that they can rely on reinstatement experts who understand the following issues.

Repair and remedial work Often it will be possible to repair the building as it is, however it is important to make sure that work done does not just paper over the cracks.

Building construction Property damage will usually go deeper than the eye can see and any work needs to ensure that potential risks to the building’s structure and fabric are assessed and dealt with accordingly.

Temporary works It is not only long term solutions that need to be considered, but more importantly what immediate actions can be taken to stop problems escalating. This could be the need to secure the site, construct temporary accommodation for occupiers or make the site structurally safe to prevent further damage.

Building regulations Building regulations have changed in recent years and these will need to be considered when carrying out reinstatement works. For example, Part L2, which refers to the conservation of fuel and power, lists a number of sustainable requirements that must be complied with.

Leasehold obligations Depending on the terms of the lease, landlords and tenants will have different obligations. It is financially prudent to make sure this is taken in to account from the outset of disaster recovery so that neither party is taking on elements outside their obligations.

Business continuity Property disasters lead to business disruption and needs to be considered when looking at the reinstatement process in order to get occupiers fully operational and trading. There is also the chance to look at how the building has been used; whether it still meets the needs of the occupiers or whether reconfiguring the premises will make the building more user-friendly.

Conflict resolution Disaster often leads to dispute and it can help to bear this in mind from the outset. Bringing in a reinstatement consultant who is independent and experienced in dealing with litigation and conflict resolution can help smooth the process.

Paul Spaven
Partner, TFT Reinstatement Consultancy, Tel: 01179 349900 or email pspaven@tftconsultants.com