The Challenge of Bushfires and Insurance
Bushfires, or wildfires, that regularly strike various parts of the world, including Australia and California, pose a significant challenge for property owners and the insurance industry. In recent years, the availability and affordability of commercial and residential insurance coverage in fire-prone areas have become increasingly problematic. Many property owners either lack fire coverage or have significant insurance gaps. Some major insurers have stopped offering property insurance in high-risk areas, leaving brokers with limited coverage options for their clients.
Mitigating Fire Risks with Resilient Housing
To address this challenge, there’s a growing focus on mitigating fire risks through resilient housing solutions, including the use of fire-resistant materials like a newly developed paint technology. A recent webinar brought together experts from various fields – a fire engineer, a former Victorian fire commissioner, representatives from Flame Security International, and an insurance broker – to discuss the potential of this new technology.
New Fire-Resistant Paint Technology
The webinar highlighted a globally patented, fully certified protective paint called FIRECOAT, developed by Flame Security International. This paint has undergone rigorous testing and has been used on a commercial property in Australia. Justin Rooney, managing director of Flame Security International, explained that after five years of development and testing, the paint was applied to a ski patrol hut at Falls Creek Ski Resort in Victoria, an area prone to bushfires.
The resort’s outgoing CEO, Stuart Smythe, stated that using FIRECOAT was part of their effort to mitigate risks and potentially moderate insurance premiums. “Whatever we can do to mitigate the risks of being in an Alpine Resort and show the insurers that we’re taking every step possible to reduce that risk, will help, hopefully, in either the moderation or escalation of insurance premiums,” Smythe said.
Insurer Support for Fire-Resistant Paint
However, the uptake of this technology is reportedly hindered by insurers. James Telford, CEO of GSA Insurance Brokers, mentioned during the webinar that FM is currently the only major property insurer to ‘accept’ this technology. Telford expressed the hope that Steadfast’s support and further education would encourage more insurers to get on board, providing relief to clients in bushfire-affected areas.
Telford highlighted that the insurance industry is struggling to find solutions to increasing risks such as floods, cyclones, and bushfires. He noted that in typical bushfire zones, most insurers are reluctant to provide quotes, leaving a smaller number of insurers offering coverage at high costs. For commercial properties, while some form of bushfire coverage is available, it often comes with significant deductibles or excesses and limited coverage.
Impact on Prestige Properties
The issue is particularly acute for prestige homes. Telford stated that insurers are not providing bushfire cover for homes valued over $2.5 million to $3 million in replacement value. This leads to higher premiums for available coverage, prompting some property owners to reduce their building’s insured value to afford the premiums. Telford’s firm has struggled to find coverage for some of its clients with prestige homes, often approaching 40 markets without success.
International Collaboration
Flame Security International, the company behind FIRECOAT, was founded by Australians and Swedes and is based at both the University of NSW and the University of California, Berkeley. The development of FIRECOAT was inspired by tragic events such as the Grenfell Tower cladding fire in London in 2017 and the devastating Australian bushfires of 2019 and 2020.
As the insurance industry continues to grapple with the challenges posed by bushfires, the development and acceptance of innovative risk mitigation technologies like fire-resistant paint could play a crucial role in reducing risks and premiums for property owners in high-risk areas.
