Insurers pulling out over waste fires

Insurance firms have warned that the fires which have hit waste industry sites this year has had a dramatic effect on insurance cover, with premiums increasing for many firms in the sector.

The warnings come in the wake of concerns raised by the waste sector that the number of insurers willing to offer property insurance, which includes buildings, contents, machinery, and business interruption cover, has declined and that premiums are being pushed up.

Elsewhere, concerns exist that policies are becoming increasingly weighted with stricter warranties and terms and conditions, meaning that it may become more difficult for waste businesses to make claims in future.

Speaking to letsrecycle.com, Alan Tune, associate director of Butterworth Spengler Insurance Group, said that while the number of fires had reduced on previous years, the scale of those seen in 2013 had been more severe resulting in larger claims.

He explained: The more traditional, composite insurers have all but pulled out of this sector completely. If the situation continues there will be many companies that simply will not be able to afford property insurance. Many in the market are choosing this route already.

Simple economics dictate that the sheer amount of losses do not stack up with the premiums taken, so why would an insurer gamble on taking on this risk when they can concentrate their efforts and capacity on lower risk trades?

He added: The result of all this is the price might be much higher and cover more limited. This is also true of liability insurance the latter has gone up as the number of accidents in the industry has increased.

Asked what waste companies could do to reverse the trend, Mr Tune explained that finding a broker with experience in the waste market is likely to be crucial in securing cover.

Premiums

Another waste insurance specialist said premiums for property insurance have been increasing for waste facilities over the last four years, but the high-profile nature of the fires this summer had served to accelerate the process.

He explained: A lot of insurers are pulling out of the market and a lot are turning around and saying no to waste companies. In terms of liability and plant insurance, thats still fairly open, but not property, and the fires certainly havent helped that.

There are also concerns some waste firms cannot meet the regulations. Material stored in the open must be 10 metres away from any other building and that is a condition some operators simply cannot meet.

However, Jacob Hayler, economist at the Environmental Services Association (ESA), the trade body representing waste management firms, argued it was important for insurers to acknowledge operators who engage with the current best working practices.

He said: When it comes to insurance, it is important to distinguish between ESA members which adhere to industry best practice and other operations where fire risk may be greater. The insurance industry is of course best placed to assess such risks and ESA and its members are working closely with insurers to help them identify best practice at waste facilities.

Guidance

The uncertainty follows a number of waste and recycling site fires across the UK this summer, including blazes at Asset and Land Groups recycling depot in Stockport on August 21, and at Jayplas plastics recycling depot in Smethwick on June 30, which was caused by a sky lantern (see letsrecycle.com story).

In response to the number of fire incidents, the Environment Agency last month reissued its checklist on fire prevention, and the Chief Fire Officers Association (CFOA), is also planning to publish new guidance (see letsrecycle.com story).

Produced with the Agency, CFOAs Pollution Prevention Guidance is likely to include recommendations on stockpile separation and minimum widths between stacks of recycled material. Further details on the CFOA guidance are expected to be announced at the Fire Futures Forum in London on November 27.