Model modular construction insurance with a broker’s help

Modular construction ticks many boxes, being greener, less resource-wasting, more cost-effective, and up to 50% faster than traditional construction methods. In the UK, it is seen as a means of delivering affordable homes targets. Its popularity is such that the global modular construction market is set to grow from a $104.1 billion value in 2024 to $140.8 billion by 2029.

Evolutionary methods in any market, including construction, are also accompanied by new risks. In modular construction, the first is rooted in transportation. If a building, commercial or domestic, is prefabricated and built off-site, it must be transported to its final location by land, sea, or air.

By that stage, the structure’s overall value is significant. It is the archetypal ‘precious cargo’ that needs to be conveyed by appropriately robust heavy-lift vessels or barges. The risk of damaging the prefabricated structure through mishandling or a transportation incident means an insurer may want to see specialist loading or discharge surveys before offering cover.

The huge value must be fully covered by the cargo insurance policy limit. Discussion with a broker is also imperative, as delivery of modular construction structure is intrinsically tied in with a construction contract that can penalise delays. Some transfer of business risk may be required with the structuring of the insurance proposition.

Balancing risk through the inclusion of excesses and deductibles within the policy wording is often essential, and a broker’s expertise can assist in this process.

The other consideration is fire. A prefabrication company takes on a major fire risk when bringing a variety of tradespeople under its roof, particularly for tasks such as welding, soldering, torching, grinding, and operating open-flame equipment, which can create sparks. Assessing a fire’s overall potential impact is crucial, but so are preventative anti-combustion measures and fire practice compliance.

A robust fire safety plan is a key part of risk management strategy in such an environment. This plan should cover everything from the number of fire marshals and deputies required to fire warning systems, screening off of welding, cutting, and grinding areas, the marking of clear exit routes, and overnight security, if required. An arson risk management plan should also be in place.

Ensuring fire watch systems are compliant with fire risk health and safety advice and conducted without fail following hot work on modular buildings is imperative. Some insurance policies may impose strict hot work conditions that need to be complied with.

Modular construction companies should abide by the Fire Prevention Association’s Joint Code of Practice for Fire Prevention on Construction Sites, which covers activities with an original contract value of £2.5m or above or smaller contracts contributing to a larger project of £20m or more.

Should construction occur in a higher-risk area, an insurer may insist on compliance with this fire Code of Practice, even if contract value limits are lower than stipulated. Code compliance may be essential to ensure insurance coverage is available and contractual terms are not breached through lack of insurance.

To construct your ideal modular construction insurance programme, please contact us today on 01274 515747.