Large fire losses: Unlocking the sources of ignition

The global insurance industry provides a mechanism for resilience and recovery from disaster or loss due to a variety of causes and circumstances. Traditionally, one of the primary reasons for buying property insurance has been to protect businesses and individuals from the risk of loss due to fire.

What causes fires to start? What can be done to protect businesses from fire? And what can be done to reduce the severity of loss?

To analyse the problem of fire, Inspection, Testing and Maintenance of fire protection equipment and systems Swiss Re Corporate Solutions Risk Engineering Services have reviewed over 500 large loss fire incidences that occurred over the past 20 years, in the USA, recorded and curated by the National Fire Protection Association (NFPA). Large loss fires are defined as fires with property damage greater than US $10 million recorded. This fact sheet reviews common sources of ignition, their contribution to property damage by general facility type and measures of protection employed.

The best way to prevent loss from fire is to prevent it beginning in the first place. To understand how fires begin, this section discusses the most common sources of ignition.

Electrical fault is the leading cause of ignition by number of occurrences, accounting for approximately 25% of large loss fires analysed and overall, approximately 13% of property damage sustained over the past 20 years.

Incendiarism or deliberately lit fire is a close second in terms of sources of ignition accounting for approximately 23% of large loss fires and overall, approximately 24% of property damage sustained in large loss fires over the past 20 years.

Hot work has long been known to be a leading cause of ignition and the insurance industry continues to promote and encourage the benefits of a strict adherence to hot work management systems. Hot work accounts for approximately 16% of large loss fires and approximately 19% of property damage sustained in large loss fires over the past 20 years.

Lastly, issues with gas supplies and gas leaks account for approximately 16% of large loss fires and overall 5% of property damage sustained in large loss fires over the past 20 years.

By frequency, the three most common facilities susceptible to large loss over the past 20 years have been warehouses and storage facilities (13%), construction sites (typically apartments and residential buildings) (13%) and manufacturing facilities (11%). Schools (4%), residential (4%), offices (3%) and restaurants (3%) are other notable occupancies that have suffered a number of large losses.

When considering total loss value however, manufacturing is a clear leader with approximately 21% of property damage accounted for, followed by warehouses (12%) and construction sites (11%).

The three occupancies most susceptible to the risk of fire noted above are consistent with the sources of ignition, generally containing significant electrical installations, often located in areas less frequented, and containing the potential for high fire loads with the regular need for maintenance activities, including hot work.

An adequately designed, installed and regularly maintained sprinkler system (including the water supply where fire pumps and tanks are installed) is evident as the best protection measure for buildings when considering large loss due to fire. Sprinklers were installed in approximately 24% of large loss fires.

This statistic however includes a key characteristic of large loss fires, as even where sprinklers were installed in large loss fire events, 29% of the time they were either impaired, shut down or isolated. Accounting for impairment, the percentage of large loss fires protected by sprinklers is approximately 18%. It follows that the lack of a sprinkler system designed, installed, and maintained in accordance with recognised codes and standards increases your severity of loss by roughly a factor of 4.  

Many large loss fires reported included significant property damage dollar values due to a product's susceptibility to damage via smoke for example, food and electronic products. In these instances, sprinklers successfully controlled fire spread and growth, limiting and reducing the overall property damage value.

A final observation regarding sprinklers was the commonality of voids, concealed spaces and roof spaces facilitating fire spread with approximately 8% of large loss building fires experiencing some form of void or roof fire spread, highlighting the importance of sprinkler protection in less accessible spaces.

To learn more about fires, how to mitigate their effects on your property, additional information, or assistance, contact your localInspection, Testing and Maintenance of fire protection equipment and systems | Swiss Re Corporate Solutions Risk Engineer.