The real estate and construction sector is constantly looking for options to make processes more efficient and environmentally friendly. Among the solutions businesses have been exploring are modular building systems due to the significant advantages they are reported to offer compared to traditional processes. Construction projects using modular building systems are perceived as being greener (generating less waste) and faster (allowing modular building construction alongside site work).
However, there have been some significant losses involving modular building construction in recent years and reports of buildings that could not be used due to structural integrity or other issues. Stakeholders including investors, building owners and occupiers should consider how modular buildings will behave during an adverse event, such as a fire or escape of water, and how they can be restored following a loss. In addition to compliance with building regulations and fire safety legislation; robust property protection principles should be incorporated in the design, construction, and operation of the facility to ensure a safe and sustainable building future.
What is a modular building?
Modular construction utilises off-site construction where building components or modules are prepared in a factory and then transported and assembled on site. A module could, for example, include a complete bedroom, bathroom, and part of a corridor. Modules are lifted into place on site and stacked to form the final building in a three-dimensional matrix type structure.
Recent losses
In July 2020 a modular building fire resulted in a total loss (opens a new window) of a 106-bed hotel.
In October 2020 approximately 1,000 residents were evacuated from the modular development reportedly due to the identification of serious safety issues (opens a new window) following an intrusive survey. A £72 million ‘upgrade and investment programme’ was announced in August 2023, nearly three years after the initial evacuation.
In July 2019 a modular building fire resulted (opens a new window) in a total loss.
Property risk
Property protection and the provision of insurance (opens a new window) requires an understanding of how a building might perform in the event of a fire (or other property loss), going beyond evacuation to also include fire extinguishment and building restoration.
A key feature of modular construction is the three-dimensional matrix formed by stacking modules with gaps or cavities between them. The cavities can provide a potential route for fire and smoke spread within a concealed space which is difficult to access using automatic fire protection or manual firefighting activities. The use of combustible construction materials increases the risk of a large loss in the event of a fire involving a cavity. Changes during building use may also introduce new routes for fire spread.
Water exposure events such as flood, water ingress, escape of water, and fire-fighting water can also result in significant financial losses. These events can impact the structural integrity, function, and aesthetics of the building.
The presence of features such as atria, basement car parks, balconies, swimming pools, hazardous materials, green surfaces, blue roofs, and renewable energy systems can further influence the likelihood or severity of a loss.
Mitigating the risk
Where modular building construction is being considered, the property risks should be carefully identified, assessed and managed in collaboration with broker and insurer to achieve an acceptable level of property resilience. The review should consider building susceptibility to avoid property damage (such as using materials that do not support combustion), vulnerability (such as effective compartmentation and fire barriers); and recoverability (to enable rapid recovery to normal business operation).
Property resilience measures beyond compliance with building regulations and fire safety legislation should be explored, with the aim to keep losses small and enable quick building restoration. Such measures might include increased use of non-combustible materials, provision and verification of effective fire stopping within voids, and provision of sprinkler protection to an accepted property protection standard. The CROSS Safety Report for Volumetric modular buildings provides some valuable learning outcomes. These include the installation of passive fire protection products in accordance with manufacturers' specifications and testing, quality assurance processes, clear design responsibilities, quality assurance and clear records of the deployment of fire stopping during installation.
Various documents have been prepared to help guide the review of modular building construction for property protection purposes. These include:
A technical questionnaire (IQ8) (opens a new window) and checklist developed by RISCAuthority (opens a new window) to elicit technical information to help understand building design and construction.
A series of essential principles (BDM01) (opens a new window) developed by RISCAuthority to help develop resilience beyond Building Regulations.
The Mass Timber Insurance Playbook (MTIP) (opens a new window) providing guidance to support all parties. Although the playbook is focussed on Mass Timber, it provides useful principles for other buildings.
Loss experience has demonstrated that fires can result in large losses within modular buildings. This increases the need for robust compartmentation and other property loss control measures. When considering the design, construction, or operation of a modular building, consult with your broker and insurer for advice at an early stage.
For further information, please visit the Lockton Risk Control page (opens a new window), or contact:
Mark Middleton, Risk Management Executive
T: +(44) 207 933 1632
E: mark.middleton@lockton.com
