Stopping waste sector insurance from going up in smoke

Clafi-s

without the press somewhere in the UK carrying a story of a waste material recycling facility of some description disappearing in a cloud of smoke, which has resulted in the insurance industry distancing itself from the sector.

A series of high-value fire claims has resulted in the withdrawal of the majority of insurers from the market giving rise to the attendant problems of availability, cost, efficacy and security of cover making it increasingly difficult for these businesses in the sector to source the protection they need for their assets and operations.

The relationship between the waste sector and the insurance industry can best be described as “troubled”.

Within the insurance industry, waste management is suffering from a major reputational struggle. This is to such an extent one insurer recently indicated if a business is involved in waste activity it wasn’t worth considering them notwithstanding not all aspects of the sector are inherently problematic.

It is going to be a long way back if the sector is to become one which Insurers are going to actively participate in again in the future but there are grounds for optimism. For this to happen, however, there is going to have to be an acceptance on the part of the industry of an increasing and ongoing commitment to improved risk management standards.

Without this commitment it is difficult to see any of those insurers who have exited the sector regaining their appetite for these risks anytime soon.

Among the areas waste businesses will have to be seen to be addressing if they are to get the insurers back on side include waste stream management, stack height control, combustible material management, waste separation and storage methods, installation of fire detection and suppression systems, staff firefighting training, the ability to divert material to landfill in the event of a facility loss, machinery planned preventative maintenance, electrical installation inspection, use of thermographics, extraction systems and business continuity planning.

A failure to actively address these and other key issues will only result in insurers continuing to offer limited and very expensive underwriting capacity with the attendant problems this will bring for the ongoing operation of the business. That’s the lucky ones.

The unlucky will be unable to obtain cover from a secure reputable insurer and will be forced to seek alternatives in the unregulated and unrated market possibly outside the UK.

There will undoubtedly be a cost to the industry, and significant at that, to get waste businesses to a place where they need to be but the payoff in terms of reduced insurance premiums and enhanced sector reputation is one that will be more than worth it.

Development director, PIB Ltd