The risk evolution of automated storage systems

The world of storage and distribution is changing. To improve operational efficiency, operators are seeking ways to optimise space utilisation, increasing both the height and/or density of storage with warehouse and distribution centres. One approach which is becoming more common is to install an automated storage and retrieval system (ASRS), enabling faster order fulfilment.

However, operating an ASRS introduces new property challenges. Claims resulting from system failures and insufficient risk mitigation measures are on the rise. Businesses adopting ASRS technology need to identify, assess, and mitigate potential hazards, particularly those related to fire, to ensure the operation is both resilient and can secure appropriate insurance coverage.

ASRS systems

Not all ASRS are equal. There are different types of ASRS, and it is important to understand the type of ASRS when assessing the risk and selecting risk mitigation measures. Common examples include:

Mini-Load ASRS: These typically consist of multiple levels of trays supported on angle irons within a rack structure. The trays can be constructed from a range of materials but are typically plastic and of an open-top design. The trays are removed from the racks by an automated system within narrow aisles. The racks can range in height and can often be very tall.

Top-loading ASRS: These consists of an open metal three-dimensional grid structure, supported by metal columns for each stack of containers. The containers are typically a plastic open-top design and are stacked onto of each other across the storage grid. Remotely operated robots use the top of the grid to access storage locations to remove or return containers, removing the need for aisles and effectively ‘burrowing’ into the grid to access or store the product.

Property protection challenges:

An ASRS introduces several property protection challenges which should be carefully considered early in the design stage. These include:

  • Storage configuration: the ASRS design can introduce challenges to conventional sprinkler systems, for example, the angle irons within a mini-load ASRS can adversely influence water distribution. The selected ASRS may be outside the scope of some commonly used sprinkler codes or standards.

  • Ignition sources: automated systems within ASRS can introduce potential ignition sources from electrical or mechanical equipment in close proximity to combustible materials.

  • Final extinguishment: sprinkler systems are designed to control or suppress a fire, but final extinguishment is still required by the responding fire brigade. The increase in density of stored materials (and height in the case of mini-load systems) can present the risk of deep seated or hard to access fires, increasing the challenge of final extinguishment, requiring clear planning, response, and longer duration fire water supplies.

Longer restoration times: the increased complexity of storage systems increases the likely restoration time following a fire loss.

ASRS insurance challenges for real estate investors/owners

  • High premium costs: property damage insurance premiums are likely to be significantly higher in properties with an ASRS compared to assets using traditional storage methods. Reasons include the potential property fire risk and longer rebuild times.

  • Insurer capacity: it can be challenging to find insurers willing to offer terms on warehouses with ASRS systems. ASRS’s could be considered an ‘emerging risk’ resulting in caution from insurers when providing terms.

  • Risk mitigation requirements: insurers may require certain mitigation measures within and around an ASRS.

  • Deductibles: insurers may apply an increased deductible. As a result, the property owner must cover a significant portion of the damage costs before insurance is involved.

  • Long rebuild times: the complex technology used in an ASRS can significantly increase the time required for debris removal, reconstruction, and commissioning. This can result in longer business interruption for the owner, operator and their customers, larger claims, and a negative impact on a property’s claims experience.

Mitigating increased risks arising from ASRSs

There are measures which can be implemented to reduce the risk of a fire and any resultant claim in facilities using ASRSs. These include:

  • Consider property protection and business resilience at an early stage of the design. Engage with your broker for advice.

  • Ensure suitable sprinkler protection is designed and installed for the ASRS. This is an emerging technology and not all sprinkler codes have guidelines for ASRS systems. One approach, used by many global insurers would be to apply the latest version of FM Data Sheet 8-34 Protection for Automatic Storage and Retrieval Systems (opens a new window).

  • Minimise the risk of ignition sources from electrical and mechanical equipment escalating to combustible materials. This can include the design of lighting, robot charging and human element controls as well as ensuring effective planned preventative maintenance and inspections.

  • Ensure an effective emergency response including early fire detection (such as using aspirating smoke detection), sprinkler protection to control the fire and detailed emergency plans to enable fire extinguishment. Clear plans should be developed in collaboration with the fire service including familiarisation visits, to determine how a fire could be accessed across all areas of storage. Additional measures such as mezzanines, remotely controlled fire monitors and long duration fire water supplies may be needed. Some manufacturers of ASRS systems provide specialist equipment to help gain access to a deep-seated fire.

  • Ensure the ASRS system is designed, operated, and maintained in accordance with good property protection guidelines (such as FM DS 8-34) and manufacturers guidance. For example, ensure stored commodities do not include products such as flammable liquids, aerosols or lithium-ion batteries. Where possible, consider use of non-combustible storage containers, rather than combustible plastic containers.

In some cases, it may be possible to explore an Oxygen Reduction System (ORS) as an alternative (or in addition to) sprinkler systems. An ORS works by continuously reducing the oxygen level in the protected enclosure to a concentration where ignition of ordinary combustibles is not possible or cannot be sustained. This is done by introducing nitrogen to the enclosure, effectively becoming a fire prevention (rather than protection) system. A key consideration is the selection and maintenance of a suitable oxygen concentration, which, depending on the code and jurisdiction, may or may not be suitable for human access. Insurers may take different positions on ORS systems. If an ORS system is being considered, this should be discussed with your broker.

It is inevitable we will see an increase in warehouse developments opting to install an ASRS. To avoid the above-mentioned challenges, adopting the recommended mitigation measures can be an effective way of overcoming insurance obstacles and reducing the risk exposure to your assets.

For further information, please visit our Real Estate and Construction (opens a new window) page, or contact:

Oliver Stafford, Insurance Administrator

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