Expanded polystyrene and the Rising insurance premiums

If you have a business involved in the food industry such as a manufacturer, wholesaler, butcher or large cold storage facility you would have experienced over the last 5 – 10 years increasing insurance premiums at a rate higher than most other industries.

Expanded Polystyrene (EPS) is used in cool rooms and similar areas as an efficient insulator at low temperatures and is generally concealed behind plasterboard, sheet metal, concrete walls or in ceilings.

Whilst in recent years we have seen more and more buildings use a primary fire retardant in EPS foam insulation such as Hexabromocyclododecane (HBCD) to promote increased fire resistance in EPS building and construction applications, the number of properties is still small in comparison.

With increased claims experience in the last 5 years faced by Australian Insurers and two multi-million dollar fires in Sunpork in Brisbane in 2016 and Thomas Foods International in South Australia in 2018 involving this type of material, insurers have been reluctant to insure this type of business and hence premiums have increased as the market shrinks in capacity.

As a general rule most traditional insurers in the Australian market will ensure SME business with EPS provided the EPS is no more than 20%-30% of floor space. Larger risks are considered on a case by case basis and acceptance and capacity depends on a number of factors including exceptional house keeping and Risk management strategy.

Historically the broker market has turned to Lloyds of London when risks become too hard to place in the Australian market, but even this market has experienced claims and a lack of appetite and finding capacity for larger risks can become extremely difficult.

If you have a property with Expanded Polystyrene, call our office and talk to one of our senior staff for the best way to approach the insurance market.

A recent ABC report highlights the issue further: https://www.abc.net.au/news/rural/2019-06-07/insurance-costs…/11177112

Example of EPS test fires may be found