Review cool store insurance early as EPS cover tightens
Cool store operators are encouraged to review their insurance well ahead of their annual renewal notice arriving, following reports of a further tightening in the EPS-related insurance market, leading to reduced cover and higher premiums.
Alan Limpyer of AB Philips confirmed some of Australia’s largest local insurers have dramatically reduced their exposure to EPS risk and have advised their underwriters to limit capacity.
“This means some insurance providers are pulling out of the EPS market completely,” Alan said.
“Where a company may have previously held $10 million for cool store related policies, it’s more likely to reduce to $5 million in the future.”
Berry industry
Recent examples from the berry industry have emphasised the challenge for cool store operators.
“We have reports from the berry industry of long–standing insurance providers not renewing insurance cover – and this included a three-year-old cool store and packing facility with 33 per cent of the building made up of EPS,” Alan said.
“This particular insurer has recently changed their criteria on EPS coverage to only insure facilities with less than 20 per cent EPS – previously it was 40 per cent,” Alan said.
“It basically means if the areas of EPS within your facility exceed 20 per cent they will not cover the risk.”
About EPS
A variety of materials are used to insulate cool storage facilities, Expanded Polystyrene (EPS) and Expanded Polystyrene Fire Resistance (EPS-FR) panels are common in the apple and pear industry.
Many newer facilities use a spray-on foam insulation which is often (incorrectly) put in the same category as EPS. The use of EPS panels is banned in some countries due to its highly flammable nature, the alternative is to use non-flammable PIR panels which generate little to no smoke in the event of a f ire and do not melt or drip.
EPS is problematic for Australian insurers due to a number of recent, severe EPS-related factory fires. The insurance risk with EPS is increased, especially when the insurer only has a small portion of the market as they need to charge a very high price for what is deemed to be a high-risk product, which makes it difficult and expensive to insure.
APAL/AB Phillips’ six considerations when reviewing cool store insurance
1. Age and size of the facilityThere may be multiple buildings on one property, or spread across properties, that were built at different times – make sure you provide exact details for each. |
2. Type of constructionWhat are the walls, floor and roof of each building made from? |
3. Type of insulationWhat type is used and how much? Some insurers ask for a percentage of the total floor area, in the apple and pear industry it is easier to share total bin capacity due to the layout of cool storage facilities using multiple rooms, instead of one large warehouse. |
4. Fire management planDo you have one to share with your insurer? Fire equipment: where are the hydrants, hoses, hand extinguishers and smoke detectors located and is there access to town water on site? *Some insurers insist on smoke detectors for EPS facilities. Smoke detectors linked to an alarm system are preferred by insurers. Sprinkler systems: do you have a sprinkler system, where is it located and is there access to town water on site? **Some insurers insist on installation of sprinkler systems which is a large cost to a business. |
5. Use of facilityWhat is the primary use of the facility – is it a stand-alone cool store or combined with a packing shed? |
6. Claim historyHow many claims have been made historically by the business and facility in general? |
Recommendation for anyone looking to upgrade, expand or build a new cool store:
Consider using PIR panels rather than EPS. Insurers look more favourably on PIR and the premiums are considerably lower. The higher one-off capital cost can be recouped rapidly and it’s worth calculating the payback period.
