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Why you may not be insured against fire damage

The UAE’s imminent 2016 fire code includes items that are likely to enhance property insurance models in the country, explains Cavendish Maxwell’s Manika Dhama


It wouldn’t be altogether presumptuous to say that the fire that gutted The Address Downtown Dubai on 31 December, 2015, was a rough jolt for the UAE’s construction sector. The hotel, gutted by an electrical failure, is now being restored by UAE contractor, Dutco.

In the aftermath of the incident, questions were raised over Dubai residents’ awareness of property insurance in the event of fire. The UAE’s insurance industry voiced its concerns about the lack of diligent measures to safeguard owners against fire risks.

Manika Dhama, research manager at Cavendish Maxwell, tells Construction Week that a dearth of fire awareness is risky business for UAE property owners.

“Unfortunately, fire has been one of the largest causes of property damage since man began building,” she says.

“Whether a thatched cottage in 17th century London or a towering high-rise in a modern metropolis, asset loss and damage due to fire represent constant threats, and despite hundreds of years of improvements in design, regulation, and incident response, each year, these losses run into billions of dollars.

“It is important that as either a building owner or tenant, you understand your insurance responsibilities. It is all too common in the UAE for buildings and contents to be underinsured, or – in the worst-case scenarios – not insured at all. More education is needed in the region to raise awareness about the significance of insuring property and assets against incidents like fire, or more recently, the flash floods seen in parts of the UAE,” adds Dhama.

According to Cavendish Maxwell’s insurance expert, enquiries related to external damages tend to increase following unfortunate incidents such as the Address fire. However, “as media coverage drops off, so too does the interest in obtaining insurance”.

For instance, in residential buildings such as apartment blocks, Owners Association Management (OAM) is responsible for insuring the building. However, few are aware that such insurance packages do not cover owners’ or tenants’ contents.

“If fire or water damage occurs in your unit and your possessions or equipment are damaged, then you would only be covered if you had taken out your own contents insurance and the policy was sufficient to cover for this event,” Dhama explains. “If you own a villa or a detached commercial unit, then you will most likely be responsible for insuring both the building and its contents.”

Undoubtedly, it is equally critical to ensure commercial structures and their contents are insured to the right value, in case of total loss. Naturally, this process works best when insurers work with property owners from the beginning.

“For those unlucky enough to suffer property or asset damage, having the right level of insurance cover is imperative to minimise losses, helping businesses recover faster and remain financially solvent,” Dhama asserts.

She adds: “If we have learnt anything from the last few months, it is that buildings in the UAE have to be built to withstand the elements. They need to be constructed with consideration of high temperatures, heavy rainfall, strong winds, and the risk of fire. Insurance needs to be in place to safeguard against such risks.”

The UAE’s upcoming fire code is expected to include significant alterations to the current framework, and Dhama says these changes will likely improve insurance models in the Emirates.

“[Under the new code], no-objection certificates (NOCs) from the Civil Defence Department will need to be received on an annual basis, instead of the current [model, which requires NOCs] only at the completion stage.”

“A significant development will also be the possible prosecution of facilities management firms, with liabilities [being transferred] to them from owners. These factors are expected to impact the insurance models that will be implemented once the new code is applied,” Dhama concludes.

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