Insurance – important for unlikely risks, too

In the middle of the night a fire broke out at the premises of Hörle Wire AB. The fire raged for two hours before firefighting could commence.

It was after midnight on 21 February 2018 the fire broke out in an electrical cabinet, where combustible gases accumulated and were eventually combusted due to an electrical spark. The fire then spread to the adjacent ceiling. As the fire broke out in the middle of the night, it is estimated that the fire raged for some two hours before firefighters arrived.

The fire broke out in the production hall. Once the fire had taken a grip on the ceiling, the fire was difficult to extinguish. The ensuing smouldering fire continued for many days, and parts of the roof had to be torn down to ensure that the fire did not continue to spread over the 4000-square metre ceiling and roof.

From a risk perspective, the production hall did not contain any dangerous fire risks – not even to a trained risk engineer's analytical eye. However, as an insurer, we know that fire is always a risk, and this of course includes Hörle's production hall.

Photo credit: Hörle AB

Immediate actions taken

Already in the morning hours after the fire broke out, If was on site to support Hörle. When an event such as the ­Hörle fire happens, the company and its employees are in a state of emergency. This does not only concern the actual fire, physical loss, and the inevitable business interruption, but there are lots of other concerns that must be dealt with:

What does the physical loss mean in terms of how long the business interruption will be? How will this affect Hörle's customers? Can some of the production be maintained? Can some of the production be done elsewhere? What does this all mean for the employees of the company?

Large claims team

The many questions, high complexity, and thousands of decisions to take require competence. If quickly set up a large claims team to support Hörle, which is the best way of ensuring that the right competencies are involved and fast decisions are taken.

The large claims team consists of a chairperson and people with the best experience and expertise for the claim in question. In this case, a building and construction expert, a machinery expert, and a business interruption expert were part of the team. The If risk engineer and underwriter were also included, both of whom provided input in cover issues and the risk itself.

The large claims team investigates questions like: What can realistically be expected? Is a certain type of machinery still available on the market? If not, what do you do? Can the business continue, and if so, in what shape or form?
The large claims team meets with the customer (which might at least be a handful of people, possible including the CEO, CFO, head of production, insurance manager and risk manager) and the broker.

The team sets up and conducts frequent meetings with all the stakeholders responsible for the clean-up operation, building, repairs, reconstruction management, evaluation of fire-damaged machinery, and purchasing and procurement of new machinery, and sets up discussions between the business interruption expert and the CFO regarding budgets and the contribution margin.

Discussions are held with the customer and the broker regarding possible coverage issues. Discussions are also held with any other insurer that may cover other parts of the business where insurance has been affected because of the fire. These are just some examples of the complex issues that need to be tackled.

To move things forward it is fundamental to build trust.

Shared goal

The number of stakeholders in a major loss are many. Information flow and information sharing is a crucial part of handling a complex loss. In the wake of an incident of greater magnitude, there will always inevitably be questions such as who do you talk to and who can assist. There will be issues with the property, machinery, inventory, commodities, business interruption, budgets and financials, cash flow, customers, authorities, officials, environmental issues, employees, unions and so on.

To ensure prompt communication to all, the large claim team needs to be structured. To move things forward it is fundamental to build trust. If always work hard to be transparent and trustworthy. This is claims handling the way we believe is most pragmatic for all parties concerned.

Hörle Wire AB quickly informed staff, customers, and the general public of the unfortunate incident, being clear as to the current status and the next steps. By being transparent, Hörle not only managed to keep employees informed and give them encouragement that production would eventually return to normal, but Hörle Wire AB also remarkably managed to keep most of their customer base, as they were reassured that deliveries of needed steel products would be maintained, and within relatively short, have a brand new modern production facility.

Having insurance is, as one can see, for unlikely risks, too. Having competent claims experts, adjusters, and managers to ensure trust and a good communication flow is vital, as is having a shared goal: getting the customer back on track with their business as quickly as possible.

Photo credit: Hörle Wire AB. Hörle Wire AB quickly informed staff, customers and If of the incident. CEO Jesper Bundgaard in the picture.

Hörle Wire AB

Hörle Wire AB produces steel wire, but not just any steel wire. This is steel wire, and steel plates, for many parts of industry. It is B2B, and types of industries span from the energy ­sector, to furniture (e.g. for a large Swedish international furniture company), to the kitchen appliance industry, toys, coat hangers, and locks. Many large international and national companies depend on deliveries of the products that Hörle Wire AB produces.

Article by

Tony Schröder

Manager of Major, Complex and International Property Claims Team, If