03 April 2023
Modern Methods of Construction
Understanding the differences between construction and property insurance
In early 2023, independent construction and property consultancy, Gardiner & Theobald (G&T) organised a series of panel discussions with experts from across the supply chain to discuss the barriers to greater uptake of Modern Methods of Construction (MMC) and help the industry better understand these innovative building techniques.
These sessions focused on key considerations for offsite manufacture; the impact MMC can have on procurement; and the challenges faced onsite. Expert panels examined the project lifecycle, breaking down the myths and dispelling many preconceptions.
The discussions discovered the importance of understanding the manufacturing process of any chosen MMC solution to help the project team respond to questions from independent parties such as a building control officer and the insurance industry.
Sam Hiller, Partner at Gallagher Specialty Construction joined G&T’s session on insurance. Sam explained that obtaining property insurance with large-scale, volumetric modular buildings is possible but similarly to construction insurance, it can be more expensive. He said to expect a c.10-20% increase in insurance rates with MMC projects as there is a degree of uncertainty about how MMC buildings perform over time. This also factors in complexities such as the possibility for hidden water ingress or increased repairs due to the highly specialised nature of MMC buildings.
Typically insurers tend to prefer underwriting new build developments of traditional frame, as this is where they hold the most data. The more challenging risks for insurers are developments that involve structural timber refurbishments and modular/MMC as the data available is not as substantial.
Sam Hiller
Partner at Gallagher Specialty Construction
Read the full Modern Methods of Construction 2023 Whitepaper here >
Construction and property insurance are two separate markets. Construction insurance is obtained at the start of a project and covers constructional risk for the contract works as well as the various other insurances that flow down from it (eg third party liability, non-negligent indemnity, latent defects etc). Property insurance follows and covers a development post practical completion and includes business interruption and loss of income etc.
“For the more complex projects such as large scale volumetric modular schemes, it is highly recommended you involve key construction and property insurers early in the design stage.
Due to the separation between the construction and property insurance markets, encouraging greater synergy between the two sectors is essential for larger schemes, especially refurbishments. If you have an existing building and are performing low value, non-structural, touch-up type works, from a cost and efficiency point of view this is probably best covered by your existing property insurers.
However, when going north of £2.5-5 million of works, the property insurance market would step away. In which case, you would need to arrange a project insurance policy taken out by the developer or utilise the contractor’s policy.
As mentioned earlier getting property insurance is possible for MMC buildings but like construction insurance, it can be more expensive with a possible 10-20% increase on premiums.”
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