Escape of water is the biggest claims driver in residential buildings. Having a best-in-class risk management plan in place is not only critical to keeping a good reputation among tenants and the general public but also to secure favourable insurance coverage.
Escape of water is the main claims trigger in the real estate sector. In 2023, Lockton has received notifications for 2,782 escape of water claims. This compares to 137 fire claims, 298 storm claims, and 18 flood claims.
For residential real estate properties, the volume of claims fell from 2,615 notifications in 2018 to 1,851 in 2023. However, the total cost incurred increased from £12.4 million to £19.7 million during this period, according to Lockton data. The average loss from escape of water in residential buildings increased from £4,757 to £10,632.69.
Benefits of effective water mitigation plans include:
More stable asset performance
Lower insurance premium
More stable premium over time
Better reputation
Helps keeping property occupation high
Higher property values
Creating best-in-class risk controls
To establish a best-in-class water risk control, a Project Water Management Plan must be completed at the earliest stage of any construction project and must be implemented and signed off by the authorising engineer before any works commence on the project. It must be revised through the timeline of a project and include details of the installation process.
It is imperative that the Project Water Management Plan highlights the accountability of the respective parties at each stage of the installation process during the construction phase. This must be an engagement process where the roles and responsibilities are accepted and channelled through a ‘Water Responsible Person’. They will be responsible for ensuring risk management procedures are in place, competent personnel are appointed and ensure duties are carried out, as well as the implementation of the water management plan.
To ensure low water related claims for residential buildings during their life cycle, high standard controls and procedures need to be followed already during the construction process.
Quality assurance during the construction phase
In a residential building, escape of water incidents can impact and delay the construction process and water can permeate through a building. Insurers highly recommend installing leak detection systems already during the construction process. To reduce the risk of an incident, pipework tests should be performed at various stages of the construction process. In summary this methodology involves:
Both air and water pressure testing to ensure a fully sealed system ahead of operation
Initial survey of whole system to make sure that all isolation valves are turned off around the whole pipe run.
Mains water testing is then undertaken, and the test witnessed for a suitable time period, up to operating pressure.
Once the testing is passed and signed off, the system is flushed and sampling undertaken, and will be brought online with the full development network at the required time.
In addition to this water mitigation testing methodology, simple housekeeping steps can be integrated to ensure water damage risk is kept to a minimum. Examples of this best practice can include:
All hoses must be disconnected and drained at the end of each day
Spill kits are available, as well as wet vacs and sum pumps in the plantrooms
Isolation valves are installed and clearly marked, and operators trained to locate and use these
All drains are connected to a sump pump
Periodic leak inspections are undertaken
Flood Mitigation Measures
A Flood Mitigation Strategy document should include the lessons learned from other projects as well as all design considerations to be discussed with the project team. The strategy should be tailored to each project and must be regularly updated during the construction phase whenever there are any changes to the works or the site environment. The risks and strategy from this document should be implemented in the Project Water Management Plan.
Ongoing risk management post-completion
Once the asset is completed, there is still the need to ensure that there is a water management plan in place. The building management team should be trained to know where wet vacs, pumps and all isolation valves are located and how they are operated to ensure high standards for water leak management once the property is fully operational. Furthermore, periodic leak inspections are required to ensure that slow leaks do not go undetected for extended periods. Evidence that such risk management processes are in place and are enforced should be passed on to insurers. If water leaks aren’t discovered early, they can lead to significant losses and subsequently impact the insurance buyers’ claims performance. These claims costs are likely to reflect negatively on insurance premiums at future renewals.
Another risk mitigation measure that insurers recommend for large residential properties is the installation of leak detection systems. There are various solutions available: Some are linked to building management systems, others include automatic shut off tools or multiple sensors that enable testing and data collection for escape of water in the building. The installation of such leak detection systems is most cost effective when fitted during the construction process. Retrofitting these can be costly and may cause inconvenience to residents.
In conjunction with an effective risk management plan, the installation and regular servicing of leak detection systems is likely to result in more attractive insurance terms at renewal and sustainability of premiums over a period of time.
This article has been produced in collaboration with Canary Wharf Group Plc. For further information, please contact:
Gregg Cordell, Senior Vice President
M: +44 (0) 7917 053 440
E: gregg.cordell@lockton.com
