A food manufacturing company in London contacted The Food Club Help Line  for names of insurance brokers. Their insurance company was asking for a 1000% increase in the building insurance premium AND they were being given a month’s extension to the current contract to either pay the increased premium OR comply with requirements laid down by the insurance company.

The Insurance Companies wanted all polystyrene and polyurethane, used as insulating material for walk-in chill units and cold stores, removed because

a)  it was considered a very high fire risk

b)  firemen will not enter a building if these materials are present

After the extension period they would withdraw cover unless one of the two actions were taken.

For most food companies a one month notice period is unrealistic to replace cladding of this nature.

In most of the food industry composite panels with a core made of polystyrene and polyurethane is used as insulating material for walk-in chill units and cold stores. These materials have been approved for use by the Building Regulations for the last 15 years and often composite panels are used in the construction of the building.

1.  A number of Food Club members confirmed that the situation, as described above, was correct.

2.  The general increase in the premiums was about 300%.

3.  Some insurance companies would not quote food manufacturers.

A solution is to replace all the insulation material with less ‘risky’ material such as rockwool or mineral wool. However, this material is three times more expensive and appears to be only satisfactory for chill units. Its insulating properties do not appear to be high enough for cold stores.

The cost of the replacement is tremendous because of the cost of labour which has to work when the factories are not producing, usually on a weekend.

There appears to be only two manufacturers of rockwool panelling in the UK, one in Bristol and one in Cardiff, and supplies may be difficult to obtain.

There are a number of factors:-

1.  The insurance companies in the UK have not being making any money in the last five years. They survive by placing the premiums on deposit with the banks or investing in the stock market. Since bank interest rates are low and the stock market is down the net effect is that they have not been profitable in recent years.

2.  Over the last three years the number of major insurance companies operating in the UK has dropped from about 18 to eight through amalgamation and takeovers.

3.  One UK insurance company was quoting prices below the others and this kept the ‘book price’ down. (The book price is a listing of the prices that the  Independent Insurance Co Ltd feels are realistic for various types of risk and which they then negotiate from depending on the size and type of client). The ‘low price’ insurance company went into liquidation and the industry was expected to bring premiums up to the book price within 3-4 years. This has not happened due to the Sept 11^th incident.

4.  The insurance companies offset their risks through the re-insurance market. They pay a premium to the re-insurers for this facility. However, the re-insurers have been hit with claims totalling $20 billion for the aftermath of Sept 11^th. This is the largest claim ever and 10 times larger than the previous largest which was Canary Wharf. The re-insurers have increased their premiums by up to 500%. If the insurance companies do not pay the premium  required by the re-insurers they must cover the risk themselves. However, they can only cover so much risk before they over extend themselves. The net result is that companies, and sectors, which are classified as high risk can not get insurance or, if they can, only at greatly increased premium rates.

5.  The food manufacturing industry is perceived as one of the highest risk sectors.  Appendix 2 lists fires in the food manufacturing sector.

6.  A major fire in a bakery in the NW of England last year claimed the lives of several firemen when the building collapsed. Now the fire brigade will not enter any building which is known to be constructed of composite panels with a polystyrene or polyurethane core. This means that often the centre of the fire can not be tackled and even more fire damage is done.

7.  The increased premiums not only affect food companies with freehold properties. Landlords who rent out property to food manufacturers may also have to pay increased premiums and these will be passed on to tenants in the form of increased rental charges.

8.  Insurance brokers and agents for insurance companies now inspect food premises. If there is any cladding material present they wish to know what type of material it is. If this can not be determined, eg from records or from the construction company, then they assume the worst.

9.  Cladding is often open at the top and the bottom. The bottom is usually bonded to the floor and the top forms part of the support structure for the roof or ceiling of the unit. This too is usually bonded, so why the risk? If the bonding or the cladding is damaged and weakened then the fire resistance is reduced. If the polystyrene and polyurethane catches light then it spreads in a matter of a few minutes. Poisonous gases and plumes of dense black smoke also result.

10.  The official description for this type of cladding is 'sandwich panels or composite panels'.  The Home Office Fire Research and Development Group have published an informative report and some key points are listed in Appendix 3.  

11.  The Loss Prevention Certification Board produces a Red Book.  Part 1, Sections 2.2 & 2.3 lists approved suppliers of composite wall and roof materials. See Links.                                                                         

12.  A series of links can be found in Appendix IV.             

2.  Advice should be taken about cladding new walk-in chill stores and cold stores with polyurethane.  However, it is likely that this will not be encouraged.

4.  Advice should be taken with regard to the need for walk-in chill stores and cold stores currently clad with polyurethane being re-clad with other material.