Composite panelling in projects: risk and insurance considerations
Composite panelling is a form of building product used to cover walls, exterior façades and roof insulation. It is a an efficient construction system favoured for its low cost, insulation benefits, aesthetics and efficient construction methodology. That said, forms of the material have been the subject of very publicised losses in recent times.
Despite the trends, compliant panelling is still widely used in new projects across Australia. In this article we discuss the background to losses sustained from the use of the material, and trends emanating from same; the various types of panels most commonly presenting risk issues; and insurer appetite, and mitigation strategies to assist procuring quotes for buildings comprising the material.
Background
In 2018 welding sparks ignited EPS (expanded polystyrene system) panelling at Thomas Foods International’s Murray Bridge Abattoir, Southeast of Adelaide. The blaze is reported to have cost insurers in excess of $300m and it took 5 years from the date of the fire until Thomas Foods was able to recommence its Murray Bridge operations.
The Grenfell Tower fire in London, killed 72 people in 2017 bringing worldwide attention to the fire risks of Aluminium Composite Panelling (ACP) and other forms of composite panelling.
Closer to home, the Lacrosse Apartments are a 21-storey residential tower constructed in 2012. In 2014, a cigarette started a fire on the balcony of one of the apartments situated on the 14th floor. The fire spread vertically up seven floors of the exterior of the building, and caused significant damage. Nobody was injured, however the cause of the fire’s spread was attributed to the use of combustible ACP.
Since Grenfell and then La Crosse, there have been significant steps taken to ensure the safety of buildings comprising ACP. This includes remediation orders insisted on by regulators to ensure compliance with revised codes around construction materials.
Insurers have been significantly impacted with claims including losses: the extent of which is still not known as the Courts continue to grapple over liability of those manufacturing, specifying, installing and certifying the materials (see for instance our note on Owners – Strata Plan No 91086 v Fairview Architectural Pty Ltd (No 3) – [2023] FCA 814.) There just is no telling on how much has been spent in Australia (let alone globally) on legal, regulatory, remedial and insurance costs as a result of Grenfell.
Types of panelling
Composite panelling typically comprises a core that is sandwiched between two outer layers to create a rigid material. There are many different forms of panels: building standards are very rigorous to assess their respective compliance for use in construction projects. Categories, types and classification of panels are set out below.
ACP is the terminology typically used for panels used in building facades. Aluminium composite panels with a polymer core are combustible, with higher polymer content being linked to a greater potential to propagate and spread fire up the building façade. The panels are favoured for their versatility in design and aesthetic appeal. As mentioned, there have been significant losses involving non-compliant products such as the Grenfell Tower Fire and the Lacrosse Building Fire in Melbourne.
FM Approvals is the independent testing arm of international insurance carrier, FM Global. FM Approvals uses scientific research and testing to make sure products conform to the highest standards for safety and property loss prevention. Products with FM certification are indicated on the packaging with the “FM” logo followed by the certification number.
EPS comprises an expanded polystyrene core. The core is usually bonded with an adhesive to fascia material, like aluminium. Often the product is used in cool room construction for its excellent insulation properties, low cost, ease of use and low weight. EPS is highly flammable and can contribute to rapid spread of fires when exposed to flames or temperatures. It can present a health, safety and environmental risk. The external fascia material can become unbonded when exposed to heat, dramatically increasing fire load. Furthermore, the core can vaporise when subject to high heat, causing fire to flash across exposed areas. It releases toxic fumes, and the dark smoke is oily and sooty. Fire retardant additives do not significantly affect the burning characteristics of polystyrene other than potentially delaying ignition. EPS panels can contain a fire-retardant core. Despite this, they are still considered combustible and do not present a favourable risk profile.
PIR panels are an insulated panel with a PIR fire-retardant core delivering exceptional thermal performance. PIR panels contain polyisocyanurate which differs from expanded polystyrene. PIR is a fire retardant insulation material, derived from polyurethane. Certain types of PIR panels are FM approved.
These are an insulated panel with a stone wool core insulating material. They are used for their acoustic and thermal performance. Whilst ROCKWOOL panels present a low risk for combustion they are not considered FM rated. ROCKWOOL is heavier than EPS panels and therefore is often not favoured as a construction material.
XFLAM is a fire-resistant panel with excellent mechanical and insulation properties and has a low toxicity. Unlike an EPS panel, its core is made from a syntactic foam that is fire resistant and with correct installation methods and ongoing maintenance, the XFLAM panels are not considered to add to fire load. XFLAM is FM approved for certain roofing systems, internal walls and ceilings, exterior wall systems and smoke sensitive occupancies.
Insurer appetite for buildings comprising composite panelling
When assessing risk, property insurers consider fire load, hazard inceptions, severity of loss and include ensuing business interruption losses. Property that contains composite panelling is scrutinised to understand whether the material will contribute to or exacerbate fire load, is exposed to hazards, and whether it will maintain its structural integrity when subjected to heat.
Insurer appetite to underwrite property risk comprising combustible material is limited. Where combustible material is used in construction, it exponentially increases rating.
Consideration must also be given to a business’s continuity planning following loss involving certain combustible materials. A fire containing EPS, or a high fire load, is more likely to have a higher severity than the alternative.
Often the severity of a material damage loss can exacerbate a business interruption loss by extending the time, or the extent of reinstatement required to repair or replace damaged property.
Considerations for new projects
In contemplating construction projects, stakeholders have come to be more cognisant of the cost of insurance not only during but post construction. This trend vigorously emerged during the most recent hard market.
The short-term benefits of using cheaper materials may result in insurance being unavailable, or otherwise, may yield narrow, cost prohibitive cover. It follows that there may be little cost benefit for the use of certain building materials.
Typically, when used in commercial situations, FM approved panels (are preferred by insurers however ROCKWOOL is an alternative low fire load material.
ACP panels used in façades are considered lower risk when they contain inert or non-combustible cores.
Applying to obtain insurance for buildings comprising composite panelling
When looking to present risk to insurers, proposers should demonstrate awareness and proactivity to fire risk. Proactive plans must look at strategy to minimise loss frequency and severity.
- Separate potential sources of ignition from the combustible insulation panels. Electrical switchboards and forklift battery chargers fixed to the wall should be removed or physically separated with a non-combustible barrier, and any electrical cable penetrations should be appropriately fire stopped.
- Where possible, replace with approved panels in accordance with FM Class 1 Standards (FM 4880), or indeed replace with other non-combustible building materials such as brick, concrete or fibre cement.
- Maintain the panels you currently have in your building to ensure there is no easy path for flame or heat to get to the insulated core material.
- Manage sources of heat, such as electrical services and process-related heat sources, to ensure that sparks or heat cannot come into contact with the insulation material within the insulated panels.
- Protect your facility to a level that is appropriate to your exposure, taking into account the costs of both building loss and business interruption.
- Prepare for the worst and put a plan in place to recover your business.
- Ensure that any composite panels are reviewed by a competent fire protection or fire safety professional to limit risk of combustion.
We strongly recommend the use of third party experts to assess hazard prevention, risk mitigation strategies, business interruption (including contingencies, such as disaster recover and continuity plans) and property replacement values.
Bellrock has a panel of the aforementioned experts that can assist the provisioning of independent assessment to aid with the declaration and presentation of risk to ensure that we can help our customers procure the most appropriate cover priced competitively.
If you are encountering issues on assets comprising composite panelling, it is prudent to start strategising well in advance of a policy due date or project completion. At least 3 months lead time should be provided for an ideal outcome.
To discuss any of the issues traversed above please contact one of our advisors via the form below.
