On 29 March, Built by Nature hosted a Network Accelerator event to identify the challenges facing the insurability of mass timber construction. “Insuring Mass Timber: Confronting requirements, driving performance” attracted 70 participants representing a spectrum of built environment practitioners from the UK and Europe.

Built by Nature wishes to thank our keynote speaker, Andrew Waugh from Waugh Thistleton Architects along with our panellists Phil Callow, Founder and Principal of Mass Timber Risk Consulting; Sam Liptrott, Director, OFR Consultants, and Kirsten Haggart, Senior Associate at Waugh Thistleton. 

The following article captures the observations, insights and possible solutions from this informative and interactive session.

INSURING MASS TIMBER: SOLVING THE CATCH-22* CONUNDRUM

The story of insuring mass timber construction begins with a fundamental understanding: that the built environment needs transformation. At 39%, building and construction is one of the largest contributors of carbon emissions, with 28% coming from operational emissions and another 11% coming from embodied carbon emissions that are associated with materials and the construction processes throughout the lifecycle of buildings.

With cities continuing to grow at pace, Built by Nature, its network and partners are advocating for a built environment that works in unison with nature, to build in a way that addresses embodied carbon emissions by using materials that reduce or even store carbon.  

The crisis is here and now but so are the solutions, yet these are not being seriously explored at present, let alone used at scale.

Mass timber, or cross-laminated timber (CLT) has the potential to make a real difference in decarbonising the built environment. But like every compelling story, the mass timber transformation faces challenges, hurdles that are hindering adoption.

A major obstacle is perception. Modern mass timber is encumbered by misconceptions stemming from old-style timber framed buildings. This needs to be addressed by raising awareness of the benefits of this form of construction and educating stakeholders throughout the building value chain.

Another, UK-specific barrier is insurance. Clients, developers, architects and engineers are reluctant to embrace timber construction if they believe the outcome will be uninsurable.

To move forward and advance the plot, these two related issues need to be tackled quickly and definitively.

Ripping up the old rule book

Building with traditional materials such as steel and concrete has become something of a box-ticking exercise, where all parties are familiar with the process, including insurers.

No such assumptions can be made with timber construction. Sam Liptrott, Director, OFR Consultants – the UK’s largest independent Fire Engineering company which specialises in sustainable timber buildings – observed that, “timber cannot simply be subbed in for steel and concrete, it’s a fundamentally different material that has distinctive properties… This means its burns differently, performs differently, it warps and will change over the life of a building.”

“Timber cannot simply be subbed in for steel and concrete, it’s a fundamentally different material that has distinctive properties…”

Sam Liptrott, Director, OFR Consultants

With timber, the process throughout the construction value chain needs to consider additional steps to ensure compliance, otherwise projects are setting themselves up for failure.

Andrew Waugh, Founder and Director at Waugh Thistleton Architects, noted that “the responsibility for these changes does not reside solely with architects, but all of those involved in the entire value chain from contractors to clients, engineers and insurers need to work collaboratively in order to successfully enable the timber transition.”   

Misconceptions around mass timber

Such collaboration needs to start with education. At present the benefits and transformative capabilities of mass timber are understood by a very niche community. Beyond this, misconceptions about timber buildings remain rife and present a significant hurdle to widespread adoption.

According to Andrew, concerns from insurers centre around a lack of distinction between mass timber and timber frame construction – all timber is lumped into the same bucket: “We need to show that mass timber is a different construction process and produces more solid buildings, especially at height so they’re not actually comparable technologies.”

“We need to show that mass timber is a different construction process and produces more solid buildings, especially at height…”

Andrew Waugh, Founder and Director , Waugh Thistleton Architects

Such comparisons are leading insurers to make false assumptions about timber construction. The first of these is that a fire in a timber building means the total loss of value from that asset. This is simply not the case. Sam said, “the estimated maximum loss (EML) of 100% is at odds with the design of timber buildings and that disconnect is making it difficult to get across the line in property insurance.”

Other major insurance concerns reside around long-term moisture ingress, raising questions around the use of timber in bathrooms, flat roofs or at ground floor level which is at greater risk of flood.

While many of these concerns are valid, they can all be addressed through good design and the incorporation of risk mitigation measures. In fact, timber buildings can be designed to accommodate hazards without leading to extensive loss. If there has been a fire or flood, timber is a material that is pliable so parts of the building can easily be replaced, which is not always the case with steel and concrete buildings. 

But such risk mitigation measures need to be considered early on when designing and constructing a timber building, rather than being an afterthought, which will only delay insurance approvals.

Engage early

This lack of education around timber sharply raises the burden of proof required to demonstrate appropriateness for insurance. A positive way to alleviate the concerns of insurers is to invite them on a timber discovery journey at the earliest possible stage.

Kirsten Haggart, Senior Associate at Waugh Thistleton Architects, believes “we need to understand the concerns from an insurance perspective. As architects working with timber, we are embedded in the process, we know what the risks are and how to mitigate them in our design. We forget that others aren’t in that world yet and it’s important we share our concerns and our knowledge so that risks are seen realistically.”

“As architects working with timber, we are embedded in the process, we know what the risks are and how to mitigate them in our design. We forget that others aren’t in that world yet…”

Kirsten Haggart, Senior Associate, Waugh Thistleton Architects

Phil Callow, the Founder of Mass Timber Risk Consulting, specialising in the insurance of timber buildings, agrees that there is a bigger burden of responsibility on the design team to address insurers’ concerns as early as possible.

He suggests creating a report for underwriters that “articulates the challenges, articulates the fact that you recognise them as hazards and that you have mitigation plans for them, including water management, buildability, what happens during construction, as well as replacement and refurbishment. And this must be done in an easily digestible way to ensure it is simple for the insurers to understand.”

And time is the critical factor here. Leaving insurance to the latter stages of planning limits the time an underwriter would have to perform the necessary due diligence. For timber buildings, time and guidance are needed to elicit a positive insurance outcome.

Pooling data

If a building’s value chain is going to deal with the climate crisis, it must innovate. This includes insurers – important characters in the timber transformation – but they will need help to facilitate this change.

Many of their risk matrices are based on historical evidence and lack data about mass timber buildings. This places the onus on those with knowledge to help fill these gaps.

According to Phil: “There are unknowns in an area where we don’t have enough data. If architects and developers can answer these questions and demonstrate through design and risk management why their building is better than a normal building then they should get an equitable response”.

“If architects and developers can answer these questions and demonstrate through design and risk management why their building is better than a normal building then they should get an equitable response.”

Phil Callow, Founder, Mass Timber Risk Consulting

A further option is to develop a databank of examples that can be shared. Built by Nature, alongside the University of London is taking a major step in providing this evidence by devising a set of pre-warrantied models for residential buildings that have been approved by inspectors and insurers. These will allow any architect or contractor to build from these designs with the knowledge that these buildings can be warrantied, will be approved by the fire brigade and, most importantly, can be insured.

As well as sharing best practice, much can also be learned by passing on information about failures. While there are inevitably sensitivities about sharing such data, the risk of perpetuating previous mistakes could also create a long-term setback for timber buildings and cast an indelible stain on this much-needed evolution in building practices.

Harnessing ESG alignment

While steps must be taken to address the issue of smoothly insuring green construction processes, the flip side of this coin is that there may come a time when so-called ‘brown assets’ (or buildings that do not encompass green ideologies) become un-investable or ‘stranded’.

The investment industry is responsible for funding a significant proportion of real estate assets. In light of the growing trend for ESG (environmental, social and governance) aligned investment portfolios, the investment market is showing a greater interest in how buildings are built.

Stemming from the changes they have already witnessed, and helped drive, in the wider energy transition, investors are starting to recognise the need to take a more proactive role in establishing a similar transformative culture in construction. Andrew says, “we’re getting direct interest from investors, who are bypassing developers and coming straight to sustainably-orientated architects such as ourselves to drive progress.”

ESG investing is not all about carbon. Andrew pointed out that there are also significant social values in timber construction, stating that working in timber presents “a non-toxic, non-poisonous working environment that allows for better working conditions and a safer non-polluting construction environment and those are very tangible benefits.”

While momentum is on the side of greater ESG in real estate assets, a stumbling block for investors stems from a lack of standardised or science-based targets – particularly for embodied carbon – making it challenging for investors to analyse and measure the environmental impact of their portfolios.  

Regulators may provide some further momentum down the line, but James Drinkwater, Head of Built Environment at Laudes Foundation, points out that it will be investors’ willingness to invest in ESG and impact opportunities that will drive change initially.

Collective action to change hearts and minds

The wider adoption of mass timber is facing the classic “Catch-22” scenario. The knowledge and skillset are there to affect real change, but the pace of this change is being hindered by a lack of understanding, fear of the new as well as poor data.

Collective knowledge can play in big part in breaking down these barriers, as well as early engagement with all stakeholders.

Philanthropy is playing its part to change hearts and minds by funding initiatives such as Built by Nature to research, demonstrate and scale the ground-breaking potential of timber construction solutions.  

But philanthropy alone will not deliver the required impact. Pioneers across the industry are needed to drive this change, pool information and share their experiences – both positive and negative – to ultimately create a playbook that others can follow.

And associated industries – such as insurance and investment – need to be open-minded and willing to embrace this necessary change. Particularly, as this timber transition is not just about reducing carbon but also about building more cost-effective, high-quality buildings with better working and living conditions for people.

The story of mass timber adoption is still being written. It’s no longer fiction, with fact-based practical playbooks driving these innovative building techniques forward. The environmental story and the business narratives are compelling – so perhaps it’s time to relegate the insurance Catch-22 thinking to the recycle bin.

*The term “Catch-22” is derived from its namesake 1961 satirical anti-war novel, describing a situation that cannot be escaped because of contradictory rules or limitations.

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