Reinsurance
Product Family
Claims
Risk Consulting
Media Center
Get In Touch

When risk managers at industrial facilities think about fire, some top concerns are hot work, faulty equipment, and a myriad of special hazards such as combustible dust and flammable liquids and gasses. Risk mitigation strategies historically targeted these common catalysts of industrial conflagrations. Until now.

Today, it is impossible to ignore the far-reaching threats posed by the wildfires raging across the West Coast. More than 5 million acres have burned across California, Washington and Oregon, causing damages set to exceed the record-breaking $13 billion in insured losses incurred from wildfires in 2017.

Wildfires are without a doubt growing in number, size, duration and intensity. Thanks to the convergence of hotter, drier conditions wrought by climate change and decades of a philosophy of fighting all fires, which allows for fuel buildup because it never burns off, we can expect these trends to continue for years to come. Insurers have traditionally modeled for natural hazards like earthquake, flood and windstorm, and fire is increasingly being added to that list.

That’s why industrial risk managers need to incorporate wildfire risk into their programs, regardless of how far your facility may be from the front line. Here are the top exposures to consider:

1. Smoke Infiltration: Smoke from California’s fires has wafted all the way to the East Coast. If smoke gets inside an industrial facility, it can cause damage to equipment, materials and finished products. It also presents an employee health hazard.

In the short term, facilities exposed to smoke could consider reversing the direction of fans or shutting down air conditioning units to keep from drawing polluted air in, though this could also present employee health and wellbeing issues, depending on the ambient temperature. A commercial air filtration and purification system designed to capture smoke and particulate matter may be worth installing.

Even if a facility is not directly exposed to wildfire, the utility it depends on could be.

2. Damage to Critical Infrastructure: Even if a facility is not directly exposed to wildfire, the utility it depends on could be. Flames, smoke and landslides all pose a threat to energy producers. Backup generators can of course keep a facility up and running while off-premises power is interrupted, but they are not designed for long-term use. 

Because of the size and mobility of their geographical footprint, wildfires put multiple utilities at risk at the same time. There’s no guarantee that power will be restored quickly. Damage to critical infrastructure can also cause supply chain disruption if suppliers or warehouses are similarly affected. 

3. Limited Fire Department Support: Industrial facilities implement fire protection systems and protocols in accordance with standards set by the National Fire Protection Association (NFPA). The problem with those standards, however, is that they assume prompt support from the local fire department in the event of a blaze. 

Currently, firefighting crews battling the infernos on the West Coast are stretched so thin, they are calling in reinforcement from neighboring states and Canada. Facilities may not be able to rely on a speedy or well-staffed response from their local department if they are assisting on the front lines. 

Risk managers may consider designing disaster plans for worst-case scenarios of maximum possible loss, which consider no response from fire departments at all. The more self-sufficient your facility is, the better you’ll be able to withstand a variety of hazards.

Planning for Resilience
At AXA XL, we’ve always been focused on building facilities to resist natural hazards. While fire is an increased threat, it’s not entirely new territory.

We already expect our clients to maintain an adequate buffer of open space around their buildings. They already have roofs designed to resist embers, fire suppression systems that meet NFPA standards, and disaster recovery plans that address supply chain and business interruption.

But more can be done to ensure businesses are truly resilient in the face of this rising risk. Going above and beyond existing standards can not only keep a facility safer for longer but can also enhance its ability to adapt and respond to new threats.

Facilities (such as distilleries or perfume factories) that adapted to the COVID-19 pandemic by using their facilities to create hand sanitizer offer a great example. A fire protection system that goes beyond the minimum standards enabled them to make that production switch safely.

Logistics companies that suddenly found themselves needing to store a greater volume of goods in their warehouses due to wildfire-induced transportation delays likewise benefit from capital improvements that exceed regulatory requirements – like advanced air filtration systems or forest management practices that maintain a larger defensible space.

The goal is to make facilities resilient enough to where they can handle more stress – whether its storing or producing more goods, dealing with hazardous materials, or switching production lines -- without adding unnecessary risk. If the unforeseen happens, they will still be prepared and protected.

Looking Forward
Regardless of what type of facility you manage or where it is located, the question of whether it will be impacted by natural catastrophe is one of “when,” not “if.” While it’s difficult to predict how wildfire risk will evolve over the coming years, it remains prudent for every business to prepare for it.

At AXA XL, we remain dedicated to minimizing climate-related risks. That first demands understanding these risks.

At their aircraft-hangar-sized research center in South Carolina, The Insurance Institute for Business & Home Safety (IBHS) simulates hurricane-force winds, hail and heavy rain to study their impact on various structures – mostly homes and small businesses.

More recently, they’ve utilized their system to study how burning embers are carried in the wind, which could develop a better understanding of how fires spread and inform more targeted fire protection strategies. As a donor to IBHS and member of its Research Advisory Council and Commercial Lines Committee, we continually support research with a specific focus on commercial structures and industrial facilities.

As employers and providers of critical services, industrial facilities play a key role in the economic success of their communities. In the end, more resilient businesses are the foundation of a more resilient society at large.

 
  • About The Author
  • Loss Prevention Center of Excellence Leader, Risk Consulting, AXA XL
Invalid First Name
Invalid Last Name
Country is required
Invalid email
Invalid Captcha
 
Subscribe

Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. AXA XL Risk. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any publication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with this publication, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.

US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.