By Lizelle van der Berg, director – GCCA South Africa
Obtaining insurance has become challenging for refrigerated facilities in South Africa and globally, especially for those that do not have what is seen as acceptable fire protection.
To address these challenges, the Global Cold Chain Alliance hosted a full day, in-person Fire Risk Insurance Seminar in Johannesburg on 10 March 2022. The seminar brought together 64 temperature-controlled warehousing and logistics executives from all over South Africa for discussions, innovations, trends, and networking. This event was initiated by the GCCA Risk Management Committee at a committee meeting held in September last year.
GCCA Risk Management Committee challenge overview
Gerhard Coetzee, the financial director of Sequence Logistics and vice chairman of the GCCA Risk Management Committee gave an overview of the challenges experienced by the industry, including the percentage increases in insurance rates over recent years and the fact that acquiring insurance is an even bigger challenge for some of the players in the industry.
Coetzee further explained that the industry remains unsure if they are making the best possible investment decisions in terms of fire risk and ensuring that facilities are safeguarded with the best possible prevention and firefighting solutions available and that those solutions are inline with what is required from insurers.
Oxygen reduction systems
Allan Cunninghame from Nitro-Gen Africa gave a detailed overview of oxygen reduction systems, as an alternative to sprinkler or foam fire suppression installations as an approved fire prevention system for cold and freezer rooms. Oxygen controlled environments are non-combustible areas and provide a proactive approach to fire prevention rather than a reactive approach.
A human being only breathes about 17% oxygen which is the same level these freezer rooms are kept at. It is completely safe for staff to work in. Cunninghame further explained the current compliance and that there are both local and international standards to follow.
“When changing to a nitrogen system, always make sure you are complying with standards and make sure you are keeping the structural integrity of the freezer room – this is critical” says Cunninghame.
A case study was presented on the oxygen reduction system that was installed at the Euroberry distribution centre in Somerset West.
Insurance market trends
Pieter Kruger from Marsh explained that the biggest problem about insurance claims is business interruption claims and that the market has changed drastically. Contributing to the change is a consistent inability to achieve underwriting profits, a material decline in investment income, a reduction in available risk capital, historical under-pricing, and a confluence of industry events, both man-made and naturally occurring.
Covid claims have become more common in insurance, which has also changed the industry drastically. This has resulted in larger companies increasing the use of data and analytics to ensure that their risk financing decisions are informed, data driven and sustainable and many players are either reassessing the strategic use and value of soft-insurance or considering the formation of a specialist self-insurance model at the centre of their risk financing strategy.
As per Kruger, it seems that markets are pressurised by reinsurers to impose blanket grid-failure exclusions. To improve your insurance renewal process you should start early and stick to an agreed timetable, identify your risk tolerance, understand the market, avoid gaps in information, expect questions, highlight lessons learnt, sell your risk, use your relationships, cast the net wider and you should have a plan B.
Reducing the risk
Karel Roodt from The Fire Engineer described the key fire engineering segments and how to comply with South African national building regulations. He then took the audience through a case study of a fire risk assessment that was undertaken at a bulk apple & pear supplier just outside of Grabouw in the Western Cape.
The scope is to identify credible and realistically probable events and identify the layout of the facility. When it comes to the process, Roodt explained that you need to assess the area, assess the likelihood of a fire starting, assess the people at risk, assess the operational continuity risk, assess fire brigade access, and consolidate the fire risk findings and give recommendations. Roodt proceeded in providing a high-level overview of the different fire systems and alternatives.
Hannes Pretorius of Paragon Systems Design explained this wet sprinkler system that combines water and a foaming agent for large scale fire extinguishment which can extinguish extensive fires in mere seconds with incredible efficiency. The water and foam mix will not freeze in a pipe grid.
The foam blankets the surface, smothering the fire. It suppresses the release of flammable vapours and creates a barrier between the fuel and the fire. Pretorius further explains that the foam lowers the surface tension of water and allows it to penetrate deep seated fires.
Due to the high expansion ratios, less water storage and delivery capacity is required. There is less damage to electrical and electronic equipment and waste & contamination control is easier and safer. Frozen foams can be removed by mechanical means, as opposed to frozen water and thus mobile racking will still be able to move.
Lian van der Merwe of Exodus Group gave an overview of the latest innovations in smoke detection technology specifically designed for extreme temperature environments that will soon be launched. This breakthrough technology will revolutionise the way forward in controlled-temperature conditions to aid in fire detection. Van der Merwe further explained the practical applications, installation criteria and financial benefits.
“Contributing to the change is a consistent inability to achieve underwriting profits, a material decline in investment income, a reduction in available risk capital.”
Tammy Grove of Kingspan explained that not all insulation is the same and that the building fabric used is a crucial part of a holistic fire safe design. The general term “foam insulation” is used but is misleading. The different materials used all have their own specific characteristics and should not be generalised as foam insulation.
Grove pointed out that stringent insurance industry requirements have led to the development of specific insurer-driven large-scale fire tests, to assess the reaction to fire performance of insulated panels with different cores.
“FM Approvals is one of the most renowned insurance and risk management enterprises providing testing and certification services for property loss prevention products and services used in commercial and industrial facilities. FM Approved panels are subjected to a significantly more rigorous test regime and their mark is recognised and respected worldwide,” said Grove.
High-performance closed-cell insulation offers the best thermal efficiency and superior fire protection, has enhanced environmental credentials and there is zero water absorption.
The Fire Risk Insurance Seminar concluded with a panel discussion moderated by Alasdair Martin of Vector Logistics. The questions for the panellists were gathered from the industry prior to the seminar, by GCCA. The audience was then offered the opportunity to ask questions, which they enthusiastically made use of. Panellists included specialists from Bryte Insurance, Marsh, Old Mutual, Paragon Systems Design, IFESA and Lockton in the United States.
Below are a few highlights from the panel discussion.
Q: How are South African insurers impacted by what happens overseas?
A: Insurers rely on treaty support and international capacity to give insurance, and that capacity is driven globally.
Q: What is a lead-insurer and why are there so few of them in South Africa?
A: There are only 3 or 4 lead insurers in South Africa. Lead insurers must be internationally recognised which takes dedication as well as a huge amount of skill and resources.
Q: Is the ‘shopping list’ from underwriters the same for South Africa vs the rest of the world?
A: Different underwriters have different options. However, they are similar worldwide because of international treaties and business.
Q: Do you foresee that local insurers might stop writing cold storage facilities completely like they have in Australia?
A: As long as South Africa still needs underwriters, there will always be a local market. The local market for insurers is good sized, and at a point where there is flexibility and movement in the country. The South African market is a bit more resilient; it is a worry because the problem of a small market has not been solved, but it is possible to get through it.
“Lead insurers must be internationally recognised which takes dedication as well as a huge amount of skill and resources.”
Q: How can we prevent insurer requirements from changing a year or two after installing a specific measure that was accepted by the insurer?
A: Consistency is a challenge between underwriters because each underwriter has different opinions on fire safety. It is almost impossible to prevent this because it is a free market and underwriters are allowed to choose whatever they want. The best idea is to pick one underwriter and put their suggestions as policy in your program and follow it.
Q: Is there a specific internationally designed system that reinsurers (local and international) prefer? FM Global, NFPA, LPC, BS etc.
A: Your standards should be based on systems that are scientifically backed. Be very careful not to cherry pick a standard. Just because one code is good for one facility, it may not be good for every system; it is important to know what works for you. FM Global is a higher standard and harder to reach; NFPA is the base standard most people try to reach.
Q: There is a perception that SANS 10287 is insufficient and therefore the guidelines of ASIB are used. When the revised SANS 10287 is published, will it be accepted as a guideline like ASIB rule book no.12?
A: South Africa does not have its own sprinkler standards. SANS 10287 will include this, which will help its credibility as a guideline for insurance. Local standards are the best because they truly keep insurers accountable. ASIB enforces proper maintenance, which is why it is accepted as a guideline. The main point is to maintain good conditions, which ASIB does; for that reason, it may be a better standard. Do a review of the system whenever anything is changed.
Q: What is your view on early detection systems vs sprinkler systems?
A: You cannot only rely on combative systems; you must have some sort of detection system as well. A lot of fires that start in cold storage facilities are electrical fires, which are not easily detected by sprinkler systems. Both detection and suppression systems should work in tandem together; they need to be equally good.
Q: What is the main cause of fires in cold storage buildings internationally?
A: Electrical fires and carelessness are the main causes. Check every day for risks of fires starting. An electrician on site can help to prevent fires. Electrical contractors should check every time electrical changes are made.
Q: If you are building a new facility, can you use the code for an older facility in the new one or is it required to get someone to bring the new facility up to code?
A: Your old facility is legal because of the code at the time it was built, but it is likely that code has changed. Your new facility must reflect that change in code, otherwise it will be illegal.
Q: Would regulators sign off on a system with two different suppressant methods in different areas?
A: That is fine! The whole sprinkler system must be signed off so as long as it is properly designed, they will sign it off. Always have a fire engineer to sign off first before you meet with regulators!
Q: In South Africa, insurance requirements are over and above building regulations. Do you have the same problem in the States and if so, how do you overcome it?
A: Most of the over and above standards are consumer driven; it is generally not a problem regarding insurance. ‑