Part of the fallout of the financial crisis and recession is a drop in business, which can leave warehouses, factories and office buildings vacant, creating new risks, a property insurance expert warns.
“Our experience is that an idle plant gets lost in the shuffle,” said Jonathan W. Hall, an executive vice president with FM Global in Johnston, R.I. “They turn off the water, they basically board it up and walk away, and you shouldn't do that.”
He noted that while a building may have reduced activity, “you can't take it off your list of things you're managing from a risk standpoint.” An idle building still needs security and must be monitored for things that can go wrong–such as frozen pipes.
Decisions need to be made about whether sprinkler systems should be turned off–depending on the structure and other factors, such as whether flammable liquids are being left in the building.
“You have plants not running, but as soon as things turn they're not going to start opening all these plants back up again,” Mr. Hall said. “So you've got this true change in risk that's happening.”
Other risks to idle property are vandalism, arson, rusting of unused equipment, “and you still have to manage that. They can't just take it off the list. It's still an ongoing asset–they can sell it if they need to.”
He noted that his company recently had such an incident in a facility that was historically used as a seasonal warehouse.
“The production plant had slowed way down and they had a lot of excess inventory,” Mr. Hall said. “They moved it into what otherwise was just a small seasonal thing and they had a big fire. Then you get a very substantial loss at what otherwise was just a blip on the screen.”
The fire was a result of lightning, and the company had not increased coverage, even though they were storing much more inventory in the space. Because of high limits, he noted, the policy was not affected.
Another impact on property that risk managers need to be aware of is the sustainability issue. “Town, states and provinces are starting to legislate things that companies need to stay on top of to be compliant,” Mr. Hall noted. “Green and sustainability are starting to have a real effect. Water use, for one thing, is being more heavily monitored.”
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