Model modular construction insurance with a broker’s help
Modular construction ticks many boxes, being greener, less wasteful of resources, more cost-effective and up to 50% faster than traditional construction methods, and in the UK it is seen as a means of delivering the affordable homes’ targets. Its popularity is such that the global modular construction market is set to grow from a $104.1 billion value in 2024, to $140.8 billion by 2029.[1]
Evolutionary methods in any market, including construction, are also accompanied by new risks. In modular construction, the first is rooted in transportation, and if a building, commercial or domestic is pre-fabricated and built off-site, it must be transported to its final location, by land, sea or air.
By that stage, the structure’s overall value is significant. It is the archetypal ‘precious cargo’, needing to be conveyed by appropriately robust heavy-lift vessels or barges. The risk of damaging the pre-fabricated structure, through mishandling or a transportation incident, means an
insurer may wish to see specialist loading or discharge surveys, before offering cover.[2]
The huge value must be fully covered by the cargo insurance policy limit. Discussion with a broker is also imperative, as delivery of a modular construction structure is intrinsically tied in with a construction contract that can penalise delays. Some transfer of business risk may be required, with the structuring of the insurance proposition.
Balancing risk, through the inclusion of excesses and deductibles within the policy wording, is often essential, and this is where a broker’s expertise can assist.
The other consideration is fire. A pre-fabrication company takes on a major fire risk when bringing a variety of tradespeople under its roof, particularly for tasks such as welding, soldering, torching, grinding and operating open flame equipment, which can create sparks. Assessing a fire’s overall potential impact is crucial, but so are preventative anti-combustion measures and fire practice compliance.
A robust fire safety plan is a key part of risk management strategy in such an environment. This should cover everything from the number of fire marshals and deputies required, to fire warning systems,
screening-off of welding, cutting and grinding areas, the marking of clear exit routes and overnight security, if required. An arson fire risk management plan should also be in place.
Ensuring fire watch systems are compliant with fire risk health and safety advice, and conducted without fail, following hot work on modular buildings, is imperative. Some insurance policies may impose strict hot work conditions which need to be complied with.
Modular construction companies should abide by the Fire Prevention Association’s Joint Code of Practice for Fire Prevention on Construction Sites, covering activities with an original contract value of £2.5m or above, or smaller contracts contributing to a larger project to the value of £20m or more.[3]
An insurer may insist on this fire Code of Practice compliance, even if contract value limits are lower than stipulated, should construction occur in a higher risk area. Code compliance may be essential, to ensure insurance cover is available and contractual terms not breached, through lack of insurance.
To construct your ideal modular construction insurance programme, please contact us today.
Sources:
[1] https://www.marketsandmarkets.com/PressReleases/modular-construction.asp
[2] https://www.wtwco.com/en-gb/insights/2024/08/modular-construction-an-increased-awareness-needed-of-project-cargo-insurance
[3] https://www.thefpa.co.uk/advice-and-guidance/free-documents?q=joint%20code%20of%20practice (download 2, 23 January 2023)