Dousing the flames

Losses due to property fires topped £1bn this year. That's the highest ever figure. Most insurers say commercial fire claims are among their biggest concerns. AXA in particular has been hit hard and had exposure to a number of big losses this year, including the Center Parcs holiday complex in Elvedon, Suffolk. A further disaster was the fire at the Triumph motorcycle factory in Hinckley, Leicestershire.

AXA chief executive Peter Hubbard is determined to tackle the problem and as chair of the ABI's property committee is forming a specialist working party.

Apart from AXA, this will contain representatives from Norwich Union, Royal & SunAlliance (R&SA), Allianz Cornhill, Avon and Zurich.

AXA assistant property manager Russell Wheeler says the agenda is currently being drawn up, but confirms the group will be conducting research into the causes of fires and ways to overcome them. The material will be shared among insurers and be fed through ABI lobbyists to ensure fire reduction is a priority on the government's agenda.

One cause of fires that the government is well aware of is arson. And it is on the increase. The number of malicious fires has doubled over the last decade to become the largest, single cause of major fires. It has become a blightiin several inner city areas, adding to existing problems of deprivation.

In 2000, the government launched the Arson Control Forum, which includes representation from the insurance industry.

This organisation investigates the causes of arson and has provided a £1.1m fighting fund to support a number of local fire brigade initiatives tackling the crime.

The forum aims to cut arson by 30% by March 2009. Much work contains youth initiatives - those under 18 are responsible for more than a third of all arson attacks on cars and property

Arson is also a devastating issue for insurers specialising in schools, such as Zurich Municipal.

Zurich Municipal underwriting manager Larry Stokes says: "The financial cost of school fires is running at over £1m a week. The human cost in terms of disrupted work and damage to communities can be far greater. Now, more worryingly, there are signs of a trend towards more fires started in the school day - placing lives at risk."

Zurich Municipal wants to see sprinklers installed in new and refurbished schools. It points out the government has already taken action to use these in detention centres used for asylum seekers

This follows the Yarls Wood immigration centre arson incident earlier this year, which cost about £35m in damage.

Insurers are also pressing for better police investigations and for more arsonists to end up in court.

But crime is not the only problem. Both the white and blue collar sectors are experiencing more accidental fires. R&SA property and packages underwriting manager Finlay Smith points out that offices are constantly adding to their electrical installations with wiring and cabling.

Fraud ia also a problem. Statistics show that there tends to be an increase in fire when the UK is in recession. Although there are low levels of unemployment, manufacturing is in decline and this is believed to be a factor.

R&SA UK underwriting manager Colin Short comments that growing numbers of manufacturing firms have cut back on staff and are working to "just in time" principles, where work is streamlined to excess and staff work under increased pressure.

Groupama risk control manager Ken Hills agrees. "Current manufacturing culture is to drive costs down and to make plant work harder and fires have broken out where machinery has been left unattended overnight, even though it was meant to be operational."

Contracted staff are another major problem. According to Laurence King, risk control manager for property specialist underwriter, Fusion: "Companies need to have good procedures in place for contracted staff. There need to be strict controls where heat is being used, for example with blowtorches.

"They also need to crack down on smoking in the workplace."

Even without the new working party, insurers are actively looking to reduce fire claims.

Short says risk selection is becoming increasingly important. "We've decided to invest more in surveys. We want our surveyors out more."

Lobbying for better safety requirements is handled primarily though the ABI and insurers want to see more of this, such as. the compulsory installation of sprinklers for certain types of industry. Currently these are only required in large retail outlets.

And insurers are increasingly taking a carrot and stick approach to pricing property risks. Companies that install good alarms and CCTV can expect discounts, as can those with sprinkler systems.

Risk management need not always involve huge cost as commonsense measures can prevent fires breaking out.

Short comments: "If a factory for example has skips of rubbish outside, they must make sure these are emptied daily. Leaving them full outside can be an open invitation for kids to set them alight."

Smith says: "Arson can also be prevented by adding metal receptacles to letterboxes so that it's impossible to push through material to start a fire."

Problem industries must also expect to pay on top of the already rising rates. The food industry is a prime example.

It does not have a good reputation as far as claims are concerned and insurers, such as R&SA, want to see risk management tightened up. As well as the hazards associated with cooking, the premises themselves are seen as hazardous.

Insurers are pressing for better building design, working with the ABI and the Building Research Establishment to encourage the construction of safer buildings using less flammable materials.

ARSON IN SCHOOLS FIVE FACTS

70% of all fires in schools are started deliberately

On average three schools in the UK suffer arson attacks every day

47% of all offenders found guilty of arson are aged 15-19

65% of all offenders cautioned for arson are aged 10-14

31% of all offenders cautioned for arson are aged 15-19

Source: Zurich Municipal