Water damage results in severe losses for commercial insureds
Recent winter storms serve as a reminder for businesses to take steps to prevent the bursting or leaking of water pipes.
First comes the frost, then the burst pipe. Despite preventive measures, tap water continues to pose high risks for companies. North American insurers had losses totaling more than $2 billion over the past ten years, according to a study of tap water claims since 2010 in which Allianz Global Corporate & Specialty (AGCS) has been involved. On average, water damage costs around $24,000. In 2020 alone, nearly 2,700 water damage claims were registered in North America, mostly as a result of a bursting or leaking water pipe. The highest individual damage amounts to almost $5 million.
Defective pipes are a major cause of structural damage and are also a recurring complaint in existing buildings. They occur in many types of construction projects and buildings and affect small and large projects alike. Much water damage results from leaks in pressurized drinking water or fire water systems, which often go unnoticed because the release occurs over the weekends or at times when no personnel are present.
These leaks are most costly when interior work has been completed or water-sensitive equipment was installed before the pipe burst. In addition to expensive repairs, this can also lead to costly project delays.
While damage could be avoided in existing buildings if water pipes and water-bearing fittings were regularly checked and maintained, carelessness and lack of monitoring on non-working days are often the cause of damage. If a system is shut down over the weekend or holidays, residual water in the pipes can freeze in low temperatures and cause the pipes to burst. AGCS also counts the current production and operational shutdowns due to the coronavirus pandemic as such special operating conditions.
New surveillance solutions and close monitoring
To mitigate this frequent pipe damage, AGCS risk consultants recommend leak detection monitoring solutions to reduce the frequency and severity of water damage by implementing an early detection system. Once water supply systems are in place, flow monitoring devices should be installed on pressurized drinking water and/or fire water pipes.
New mobile detectors, such as wireless water detectors, automatically detect the entry of liquids into rooms and containers. They can be used to monitor temporary work sites such as rented office buildings and travelling construction sites. In other solutions, detectors are programmed to sound an alarm in the event of an unexpected flow of water after hours, whereupon a monitoring service alerts site representatives to a possible leak.
In addition to these technologies, an active preventive maintenance program plays a significant role in preventing water damage. Sensitive areas in particular should be closely inspected by experts to reduce downtime and increase reliability. Minimizing damage significantly reduces risks during subsequent commissioning and timely detection is crucial to avoid significant damage.
Thomas Varney is the Allianz Risk Consulting regional manager in North America at Allianz Global Corporate & Specialty (AGCS). Based in Chicago, he joined AGCS in 2011. Allianz Risk Consulting uses multi-line risk assessment engineers to cover the full spectrum of risk management services, from basic hazard and human element reporting, to in-depth analyses of industrial operations and financial exposures.
Related: