1. The Devil You Know… A practical application of risk surveying… Hugh Khull, Risk Survey Manager, Cerno 1

2. The Devil You Know… The devil you know is better than the one you don’t. Old idiom 2

3. EPS Building – $2.7 Mil 3

4. Jumping pillow – $4.6 Mil 4

5. Underinsurance Buildings Bushfire Attack Level – effect on rebuilding costs. 5

6. Surveyors need … Knowledge of underwriting Research skills An insatiable curiosity A technical bent – buildings, contents, processes Observation skills Ability to follow a logical process Relate well with people Write clear and meaningful reports 6

7. Surveying … Research the business General observation of site Follow a logical process Ask questions Be observant Remember (what you see) Photographs Review & summarise before leaving the site 7

8. Cases: A country hotel Like this one … Or this one 8

9. But not this one … 9

10. Plastic factory … 10

11. Plastics warehouse & factory 11

12. Plastics factory (cont) … 12

13. Plastic injection 13

14. Window factory… 14

15. Powder coating … 15

16. Window manufacturing … 16

17. Engineering factory 17

18. Underwriting Risks … Physical Risks – Construction – Occupation – Exposures – Fire protection – Electrical systems – Security – Liability hazards –Warehousing & storage –Cooking –Dangerous goods (incl flammable liquids) –Safety procedures 18

19. Moral Risks … Insured Approach to business Type of business Housekeeping Indifference to Safety & Security Indifference to Fire Risk and prevention equipment Poor maintenance & presentation of the work place 19

20. Classes of Construction... Massive – solid brick, stone or concrete, concrete floors & support beams of brick stone or concrete; Brick stone or concrete buildings with a reinforced steel concrete or steel I beam frame but only if the steel frame or reinforcing steel is encased in concrete… Note: small quantities of combustible materials are sometimes allowed but usually only up to about 10% of the material in the building. 20

21. Massive building … 21

22. Classes of construction... Other features of Massive buildings: Internal separation Stairs & lift wells enclosed... Fire doors Parapets Why no unprotected steel...? 22

23. Behaviour of steel in a fire... Steel loses its strength in a fire. At:... 300 degrees C it starts to lose strength 550 degrees C it has lost 60% strength 800 degrees C it has lost 90% of its strength Continues to lose strength at an increasingly slower rate until around 1,500 degrees C when it fails completely. Typical fire: 1,200 degrees C 23

24. Classes of construction... Fire resisting construction - steel or reinforced concrete supporting frame, steel roof trusses with concrete or brick infill panels or sheet steel cladding. Floors should be of concrete. 24

25. Fire Resisting Construction 25

26. Classes of construction... Inferior - all other combustible materials such as timber, fibro cement sheets, timber floors Mixed construction – a combination of materials. Some non combustible and some inferior. Glass curtain Tilt up concrete slab EPS 26

27. Inferior & mixed construction 27

28. EPS... Expanded Polystyrene Foam Sandwich panel (EPS) A sandwich of a central core of expanded polystyrene foam between steel sheets. Used in freezers cool rooms and similar buildings 28

29. EPS (Expanded Polystyrene Foam Sandwich Panel) 29

30. EPS Building 30

31. EPS building 31

32. Cool stores … 32

33. EPS Management system… Regular inspection of panels to ensure no damage Immediate repair of any damaged panels Preventative measures - impact Removal or isolation of heat/ignition sources – including switchboards Minimise and protect penetrations No attachment of items to panels – switchboards Hot Works Permit System 33

34. Impact prevention – EPS 34

35. Unprotected openings… 35

36. Damaged panels… 36

37. Classes of construction... Glass curtain: Steel or reinforced concrete frame with external cladding of glass panels Typically seen in CBD high rise buildings 37

38. Glass curtain buildings... 38

39. Cinema – steel & glass extension … 39

40. Asbestos … 40

41. Asbestos …. Risk management of asbestos: – Have an asbestos survey done by a qualified asbestos surveyor – Create an asbestos register – Review and update the asbestos register regularly (annually) – Refer to it whenever work is to be done on the building – Any asbestos in work area to be removed by a properly qualified asbestos removal contractor before work starts 41

42. Tilt up concrete 42

43. Why things burn … Three requirements: Fuel Oxygen Heat (ignition source) ‘Flash point’ & ‘ignition point’ Important to know what the fuel is … 43

44. Fire fighting equipment Classes of Fires ‘A’ – combustible materials (wood, paper, textiles, plastic, etc) ‘B’ – Flammable liquids ‘C’ – Combustible gases ‘D’ – Metals (magnesium etc) ‘E’ – Electrical ‘F’ – Cooking oils 44

45. Types & uses of extinguishers… TypeColour codeClass of fire WaterRedA FoamRed with blue bandA & B Dry ChemicalRed with white bandA,B,C & E CO2Red with black bandE VaporisingRed with yellow bandA & E Wet ChemicalRed with oatmeal bandA & F 45

46. Typical extinguishers… Dry Chemical & CO2 Hose reel & Dry Chemical 46

47. More extinguishers… Dry Chemical & Wet Chemical 47

48. Water on burning oil… 48

49. Sprinkler systems… The most effective way of controlling fires First sprinkler system (manually operated) – 1812 First automatic system – 1874 Grinnell system - 1881 (improvement on 1874 system) 49

50. Sprinkler head … 50

51. Sprinkler Systems ClassificationTemperature Activation Temperature (degrees C) Bulb colour Ordinary57 - 68Orange (57 degrees C) Red (68 degrees C) Intermediate79Yellow Intermediate93Green High141Blue Extra High182Purple Ultra High227 - 260Black 51

52. Sprinklers… Sprinkler heads – (Green – 93 C) Blue (141 C) over deep fry 52

53. Drenching system … 53

54. Sprinkler stop valves … 54 E

55. Older style stop valves … 55

56. Water supply … 56

57. Dangerous goods… 57

58. Gas Storage … 58

59. Dangerous goods storage … 59

60. Hazardous goods signs 60

61. Gas Bottles … 61

62. Kitchen 62

63. Deep fryers – from this … 63

64. … To these … 64

65. Filters & hoods … 65

66. Flue fires … 66

67. Electrical systems… Two types – wire fuses & circuit breakers Fuse type & positioning Apparent age & condition Wiring Temporary wiring Thermographic scan done Test & tag system in place 67

68. 68

69. Switchboards 69

70. Hotel switchboard … 70

71. More switchboards … 71

72. 72

73. Electrical… 73

74. Electrical… Hot spot Wiring in old conduits 74

75. Electrical… Switchboard in pub Conduits from that switchboard 75

76. Electrical… Overloaded? In a joinery… 76

77. Underinsurance… Underinsurance is a major issue in Australia… Reasons for underinsurance are many and varied, And they are complex… 77

78. Reasons for underinsurance… Lack of understanding of the actual replacement cost Confusion between market value and replacement cost Building too large or unsuitable for current operations Increased cost of reinstatement not understood Not reviewed for years – believed to be adequate 78

79. Calculating replacement cost Estimated Replacement Cost not a valuation To identify the risk of underinsurance… The only accurate cost is when there is a full set of plans, drawings, specifications, engineering requirements and a contractor has costed it to do the job. Even the he adds a contingency margin, and There are usually variations during the build. 79

80. What is in an ERC… Cost of the building Car park, driveways, fences, gates etc Cost of demolition and removal of debris Professional fees Builders mark-up Location allowance Escalation allowance GST 80

81. Calculating Replacement Cost... Steps in the calculation process... Type of building – office, factory, warehouse etc Construction – brick, tilt up slab, steel etc Class of Building Area of building Other inclusions in the estimated replacement cost Construction cost rates Special fixtures & fittings 81

82. Class of building... Buildings are classified as Average, Quality or prestige Measurement: Australian Standard Method of Measurement of Building Works – 5 th Edition Provides a uniform basis for the measurement of buildings Three classes... 82

83. Average Buildings of Average specification are defined as generally being of a simple design with a basic square or rectangular shape. The materials and workmanship are sufficient to satisfy Building Codes. Low construction costs are of higher importance than distinctive features 83

84. Quality... Buildings of a quality specification are generally of simple design (as for average) with additional features to give a distinct point of difference. The materials and workmanship are of a high quality and exceed Building Codes. Attention to detail is construction and design is of high importance. 84

85. Prestige... A building of a Prestige specification is generally of a complex design with additional features to give a unique and distinct point of difference. The materials and workmanship are of the highest quality and exceed Building Codes. Attention to detail in construction and design is of high importance. The primary concern is for the tenants comfort and pleasure. 85

86. Area of the building... Building rates are per square metre They apply to the total of the area of all floors, not just the footprint of the building Area can be obtained:  from plans,  by measuring,  Insured may be able to advise, or provide a valuation  From a source such as Council, Government etc Google Maps/Earth 86

87. A calculation - office & factory… Building Area: Office - 463 square metres Factory – 1,200 square metres Asphalt car park – 520 square metres Fencing – 150 linear metres (1.8 m high, steel clad,) Gantry crane (4 tonne lifting capacity) - $85,000 (installed) Construction: Tilt up concrete panel, Steel clad roof, steel roof trusses Concrete floor 87

88. Building costs/m2 Rate per square metre: Office - $2099.28 Factory - $893.49 Car park - $186.14 Fencing - $126.92 per linear metre Demolition & Removal of Debris – 266.10 Professional costs - $29.33 88

89. Building cost … Office – 463m2 @ $2099.28971,966 Factory – 1200m2 @ $893.49 1,072,188 Car park – 520m2 @ 151.82 78,946 Fencing – 15 lm @ 126.92 19,038 Total base building cost: 2,142,138 89

90. Plus … Dem & RoD1663m2 @ 266.10442,524 Professional costs 1663m2 @ 29.33 48,775 Subtotal 2,633,387 Plus – 15% Builder’s margin395,008 Location allowance – 1.7% 51,483 Escalation - 9% 277.189 90

91. Net rebuilding cost:$,3,357,066 Plus GST @ 10%$ 335,706 Total rebuilding cost$3,692,773 Plus Crane$ 85,000 Total ERC$3,777,773 91

92. Example 1… Warehouses, offices, display rooms and motor wreckers: building was owner designed, engineered & built input from family & associates Drastically underinsured at $3.150 million ERC - $5.9 Million 92

93. Examples 2… Retail shop… Massive construction Previously occupied as an office Purchased for $1.5 million Insured for $1.5 million ERC - $4.4 million (average); $5.0 million (quality) 93

94. Example 3 … Farm shed … Area: 1,380 square metres 11 metre ridge height Steel clad on steel portal frame Concrete rim foundation and asphalt infill floor Insured for - $400,000 ERC – $1,860,000 94

95. 95

96. 96

97. Case study – Cinema complex... 97

98. Cinema 98

99. Cinema 99

100. New steel & glass extension 100

101. Cinema – steel & glass extension 101

102. Cinema complex floor plan 102

103. Thank you. Questions? 103

104. Occupation… Single or multiple occupancies A description of the business activities & processes Housekeeping Storage & warehousing Dangerous goods Cooking 104

105. Exposures… Internal - other tenants External – occupancy, proximity, construction of neighbouring businesses Separation – distance or physical barriers Environmental - land Type of area Exposures to extraneous hazards 105

106. Typical risks surveyed… Mushroom growers Flower growers Plastic extrusion factories Hotels & restaurants Take away food outlets Go Kart Club circuit Electronic component Nursing homes Cinemas & theatres Abrasive blasting works Timber mills Hardware & timber outlets Joinery factories Strata title residential Surf club Furniture carriers/stores Retail Seafood factories (EPS) 106