Flooding is the most likely peril to cause damage and disruption to UK business property but fire poses the greatest combined frequency and severity threat, according to analysis of claims data by FM Global.
Claims data collected by the commercial property insurance specialist between 2008 and 2013 reveals that flooding, including heavy rain run-off and sewer back-up, is the most common form of property loss and disruption for UK businesses. It accounted for 33% of all losses to business property at the 1,000 cases studied.
The second most frequent form of loss is fire. It accounts for 17% of all losses to business property in the UK over the period examined. Damage caused by escaped liquids from tanks and pipes is the third most common loss at 12%.
When severity of losses is factored in fire risk jumps to the front of the queue. According to FM Global’s research, as well as being the second most frequent cause of loss it ranks sixth in terms of individual claim severity.
Building collapse, which is 25% more costly that the second most expensive incident of mechanical breakdown, results in the highest average loss. It is rare though, accounting for less than 1% of all business disruption.
On average the third most expensive loss to business property in the UK is explosion. But this accounts for only 1% of all incidents.
Ben McKenna, Operations Claims Manager London Operations, said the findings make clear that mitigating fire risk should be at the top of UK businesses’ agendas.
“Businesses ought to do everything they can to ensure they have automated protection in place to stop them being knocked out of business. The most effective and established form of protection is the installation of automatic sprinklers,” he said.
He stressed that it is also important that businesses don’t turn a blind eye to high severity/low frequency events under the notion that they won’t happen to them.
“Over a period of 30-40 years, the chances of one of these severe events occurring is much greater, and businesses ought to take every measure to ensure the resilience of their operations,” he added.
This article first appeared in Commercial Risk Europe in September 2015.