How can contractors manage their premiums when taking on timber frame build projects?

More and more traditional house builders are turning to timber framed building methods. The benefits to the Developer and Contractor of installing prefabricated timber structures are obvious, including:

• Speed of construction on site
• Cost benefits associated with the ability to deliver a higher number of units at a reduced cost
• Positive environmental impact – most of these structures have significant ecological and insulation benefits

In fact, the new Timber Frame Market report from MTW Research has found that timber frame house building is set to rise by some £70 million in 2022, so growth in the sector is set to continue.[1]

But what Developers often fail to consider is the insurance implications surrounding building using timber framed methods. Whilst there is little impact on the risks around Public and Employers’ Liability, there are significant challenges when considering the insurance on the Property risk, or the “Contract Works”.

Despite this method of construction being used for centuries, insurers still deem using timber frames as a modern method of construction. Whilst insurers have years’ worth of claims data based on traditional construction methods, the relatively recent use of off-site prefabricated structures on construction sites provides challenges, especially when some insurers have already experienced significant losses on construction sites where modern methods are used.  This caution in turn pushes premiums upwards. And in fact, many insurers just aren’t keen to insure them at all.

The major concern for insurers is the risk of fire. Timber is combustible and the impact on fire spread across a construction site could be catastrophic, compared to a fire on a more traditional brick-built site where containment is likely to be far easier. Timber frames are often left exposed and vulnerable while other trades are working on their installations and, inevitably, these trades can involve the use of heat, which needs to be rigorously controlled. Construction sites are also naturally vulnerable to arson, so the level of security and protection in place will play a critical part in an underwriter’s assessment of the risk.

The small pool of insurers who will consider risks involving construction using timber framed and prefabricated methods insist on in-depth information before offering quotes.  This might include:

• Detailed site map
• Fire Risk Assessments
• Detailed Build Programme – showing the period and amount of exposed timber at any one time
• Type/Grade of fire retardant being used on the timber frames, which may need details from the supplier
• Access control
• Heat work precautions taken when sub-contractors are working on site
• Security information – depending on area, experience and claims history of the Contractor, insurers may ask for:
  • Full boarded perimeter fencing
  • Secondary inner Heras fencing around the exposed timber build sites
  • Monitored alarm & CCTV
  • 24hr manned security
• Experience of the Contractor – do they have experience of building using timber frames?
• Are they using bona fide Sub-contractors with timber framed construction experience?

Even with all the above information, the Contract Works premium is likely to be higher than a traditional build project of the same value. However, the more information we can provide to insurers, the better the premium we can negotiate.

Providing insurance for construction companies is one of Howden’s key strengths, we have excellence relationships in the construction market, and we have excellent relationships with all insurers who offer cover for timber frame methods. Armed with full information, we will be able to negotiate the right solution for your project or annual policy, with a market which understands your business. We work with insurers who support positive risk management which might include funding to help you improve your risk, as well as providing the widest cover at the best available price.

If you’d like to find out more, contact Howden's on 0161 834 1884.

[1] Timber Frame Construction Market Research & Analysis UK 2022-2026