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As published in EGI on 13 February 2019 and EG on 16 February 2019.Brian Kilroy and Nolan Wilkens outline the risks that the effects of climate change pose for buildings and how to mitigate them through insurance.

2018 brought with it some of the most erratic weather extremes the UK has ever seen. However, extreme and fluctuating weather conditions are traditionally tough on the built environment. Cold temperatures have the potential to alter the materials used in structures, as does the increase in moisture through snow and rain. Cracks in buildings due to thermal movement are common, as is flooding that could compromise the structural integrity of the building. In the winter, it is very common to hear reports of burst pipes due to rapid temperature changes or water ingress from storms or flooding. These changes, and the defects they lead to, have a significant effect on the way we maintain and protect our buildings and their value.

Insurance in a changing world

Building insurance and its relationship with climate change is an interesting issue. Insurers base their products on highly complex algorithms led from many years of collected data. As a result, policies are not set up to reflect the current effect that climate change might be having on buildings. The industry will be gathering the data now for products that might be introduced in a few years’ time.

That said, many common building defects are covered under a latent defects insurance policy, should the building in question be younger than 10 years old or be comprised of an addition that is less than 10 years old. Building defects in older buildings can be covered by building insurance. Cracks due to subsidence, flooding, burst pipes, and building fires can all be covered under an insurance policy.

A question could be asked as to how levels of cover or premiums might change to mirror an increased risk to buildings as a result of climate change. Landlords may also wonder how they might be able to insure against the risk of their assets decreasing in value as a result of climate change.

Insurers have a responsibility to their clients to adapt to the current environmental situation. Now, there are very few environmental insurance policies that protect against cases that do not involve contamination. Should the cladding on a building become damaged due to water ingress, the physical risk would be covered. If, however, the cladding failed to insulate the building, making it less energy efficient and reducing the EPC rating, the risk would not be covered. In the case of climate change, the most relevant way for insurers to adapt is to extend performance criteria to energy performance.

Though these changes will not occur rapidly, the rumblings of change have already begun. In the same way that builders and insurers have implemented acoustic regulations, the industry will need to develop policies that cover the claimed energy performance of a building. Other new policies could include an analysis of the building’s carbon footprint to encourage builders and building owners alike to prioritise sustainable materials and design.

The insurance industry – and the UK at large – are in desperate need of a paradigm shift. We must adapt our current designs, materials and methods to fit our climate needs. According to the UK Green Building Council, 80% of the UK’s building stock that will exist in 2050 has already been built. However, there is still time for refurbishment and innovation, and it is in these refurbishments that the insurance industry has an opportunity to impart great change. By developing policies that focus on energy efficiency and performance guarantees, insurers can manage the risks of climate change by impacting design, materials, and performance.

Maintaining our current built environment

From a surveyors’ perspective, the effect of climate change can be countered through implementing a planned preventative maintenance (PPM) strategy. Having an active PPM document in place is crucial to mitigating risk. For it to be effective it should be kept as a live document and updated year-on-year when works are completed. A properly maintained building is a constant moving target, with the consideration of Capex funding, EPC compliance and occupier requirements constantly shifting the demands of the building fabric.

A PPM strategy will include regular building inspections and set out a programme of current and predicted repairs, maintenance and replacements, taking into consideration when weather changes will impact any faults with pre-emptive repairs. It will also cost out a schedule of works, allowing landlord costs to be spread and budgeted for.

At its most basic level, a good PPM strategy will consider the following with regards to changing climates and the impact on a building:

> Gutter cleaning – this should be done every six-months and is simple but crucial. Blocked gutters undoubtedly contribute to flash floods.
> Roof repairs – storms lead to falling slates or tiles from a pitched roof, which can cause roof leaks internally and can encroach on mechanical and electrical fabric too, creating very expensive damage. In addition, falling tiles can cause injuries.
> CCTV drainage surveys – these can provide enthralling DVD movies of the underground network of pipes below a building and – with incredible accuracy – can record cracked pipes (which could lead to subsidence), blocked pipes (which could lead to waste backing up into the property), and also indications of tree roots.
> Assessing flat roofs – recent extremes of weather have seen asphalt flat roof coverings exposed to huge ranges of temperature, which increases the risk and probability of cracks, blisters and ultimate failure, leading to water ingress.

Planned maintenance and insurance risks

If the long-term position of insuring against climate change is still unknown, there could be an argument to suggest that PPM strategies could be used to help landlords reduce an insurer’s risk and therefore see this reflected in either the ease with which claims are settled, or the level of premiums.

Maintenance and the presence of a solid maintenance plan does currently form part of latent defects insurers’ terms in a growing number of cases, but in practical terms, this can allow claims repudiation where a property owner has failed to adhere to the agreed maintenance schedule. Where a maintenance schedule is part of a latent defects insurance policy, it should be regarded as a positive, pragmatic way to ensure that a building is covered. The big, compelling, question is: could we get to a place where there is an opportunity for latent defects insurance and general buildings insurance to be seamlessly linked, with a planned preventative maintenance strategy underpinning both?

Brian Kilroy is Managing Director of Foxwood Building Guarantee, appointed representative of Property Insurance Initiatives, and Nolan Wilkens is an Associate at Malcolm Hollis.