The bushfires, or wildfires, that regularly strike all over the world, including in Australia and California, are a major challenge for property owners and the insurance industry. Recent years have seen increasing issues around the availability and affordability of commercial and residential covers in fire prone areas. Increasing numbers of owners have no fire coverage or significant insurance gaps. Some big insurers no longer offer property insurance in high-risk areas.
These fire and insurance-driven challenges can leave brokers with few coverage options for clients.
To meet this challenge, mitigating fire risks with resilient housing is becoming more of a focus, including the use of fire-resistant paint. A recent webinar brought together a fire engineer, a former Victorian fire commissioner, Flame Security International and an insurance broker.
The group discussed the mitigation possibilities of a new paint technology and called on more insurers to support it. The aim, they said, is to improve fire risk management and reduce skyrocketing premiums globally.
Justin Rooney, managing director of Flame Security International, said this is the first globally patented, fully certified protective paint capable of surviving extreme fire conditions that has undergone trials. Rooney’s firm is based at the University of NSW in Sydney.
After five years in development and testing, in December the paint was used on an Australian commercial property.
“Whatever we can do to mitigate the risks of being in an Alpine Resort and show the insurers that we're taking every step possible to reduce that risk, will help, hopefully, in either the moderation or escalation of insurance premiums,” said the resort’s outgoing CEO Stuart Smythe in a video played during the webinar.
However, according to some brokers, one major obstacle to further uptake of the technology is insurers. During the webinar, James Telford (pictured), CEO of GSA Insurance Brokers, said FM is the only major property insurer to “accept” the technology.
“Insurers want to mitigate risk and it's [FIRECOAT] no different in our eyes to a sprinkler head or fire blankets, or whatever it might be,” said Telford. “If you can find a way to protect an asset that will provide further protection than not having it, surely that should drive premiums down.”
The broker said he hopes Steadfast’s support and further education will help more insurers “get on board and provide the relief that our clients and every person that owns a property in bushfire affected areas can access.”
“It's something that we're pushing,” he said. “We want insurance companies to listen and understand and that takes time.”
Telford said the insurance industry is “struggling at the moment” to find solutions to a range of increasing risks including floods, cyclones and bushfires.
From a bushfire perspective, Telford said the modelling is a particular challenge.
He said in a typical bushfire zone, “most insurers will walk away from the option to quote.” Telford said that leaves a smaller number of insurers offering capacity but at a high cost.
However, he said for many commercial properties, bushfire coverages of some kind are still available.
“But there are significant deductibles or excesses and also limited covers,” said Telford. “I think we'll continue to see increasing pricing through the market.”
The CEO said one particular property market, where brokers are often involved, is particularly impacted: prestige homes.
“In the broking world for prestige homes, insurers are not providing bushfire cover,” he said. “That might be any home over $2.5 million to $3 million in replacement value.”
Telford said the price of any available bushfire coverage then goes up, which drives customers to reduce their building’s value so they can afford these expensive premiums.
He said his firm has a number of clients who would like to insure assets like their prestige homes.
“We can go through 40 markets without finding any success for them,” said Telford. “So there's probably a lot of clients out there who don't have cover.”
According to its website, Flame Security International was founded by Australians and Swedes and is based at both the University of NSW and the University of California, Berkeley. The leadership team includes Robert Kelly, CEO of Steadfast Group. Steadfast also has a controlling share in GSA Insurance Brokers.
“Fire Coat was actually born from the tragic Grenfell Tower cladding fire in London in 2017 and the devastating 2019 and 20 bushfires here in Australia that impacted so many people,” said Rooney during the webinar. “It wasn't just homes lost, it was the damage done to flora, fauna and the ongoing impacts on infrastructure and business.”
Insurance Business is reaching out to major insurers to find out their view of this fire-resistant paint technology.
As a broker, how are you dealing with your clients’ bushfire risks? Please tell us below.
