When the time comes to renew your commercial property insurance, it pays to undertake a risk assessment of your property.
In this post we will explore your legal obligations to carry out a risk assessment, along with the links between risk assessments and commercial property insurance. We will then outline a step-by-step guide to carrying out a commercial property risk assessment for insurance renewal.
Are Risk Assessments a Legal Requirement?
Risk assessments are a legal requirement. The Health and Safety at Work Act 1974 specifies that it is “the duty of every employer to ensure, so far as is reasonably practicable, the health, safety, and welfare at work of all employees.”
Further, the Management of Health and Safety at Work Regulations 1999 states that every employer needs to make a “suitable and sufficient assessment of … the risks to the health and safety of employees to which they are exposed at work.”
These regulations go on to specify that you are also responsible for assessing “the risks to the health and safety of persons not in employment arising out of or in connection with” your conduct or undertaking.
This means that, if you own a commercial property, you have a legal responsibility to carry out a risk assessment as a landlord. Even if you do not use the commercial property for your own business, you still have a legal duty of care to assess the risks to any commercial tenants who lease your property, along with any contractors or other professionals who may spend time on the premises.
What Are The Links Between Risk Assessments and Insurance?
In addition to your legal responsibilities to carry out a risk assessment, your insurer may require you to carry out periodic risk assessments of your property as a condition of your commercial property insurance. They may also specify certain conditions that must be in place to manage and mitigate risks so as to maintain a valid policy.
The good news is that, if you can evidence your risk assessment and management procedures to your insurer, it may help to lower the price of your policy. Insurance is all about risk, and if you can demonstrate to your insurer that you take risk seriously, they may reward you with lower premiums.
Commercial Property Risk Assessment Step-by-Step
Whether this is your first risk assessment, or you’re reviewing a previous one, here is our step-by-step guide for ensuring your commercial property risk assessment covers essential risks.
Identifying Commercial Property Hazards
When it comes to risk assessments, there will likely be many overlaps between your legal obligations, and the conditions your insurer outlines in your policy. You should be able to cover all of these obligations through taking a thorough approach to risk assessment: Taking the time to identify any potential hazards throughout your commercial property, and specifying the steps you can take to manage and mitigate these risks.
For each hazard you identify, you should specify:
- Who would be at risk, along with the potential severity of the risk.
- The current safety measures that are in place.
- Any further actions you can take to manage, mitigate, or eliminate the risk.
Your risk assessment should focus on four key areas:
- Security
- Fire safety
- Flood protection
- Maintenance
Security
- Consider any factors that might encourage criminals to target your property. Thieves are more likely to target your property if you keep valuable materials or equipment onsite. Vandals and squatters may be more likely to target your property if it appears abandoned or unoccupied.
- Identify all possible points of entry, along with the current security systems in place.
- Consider any gaps in your security systems, and how you might enhance your security. This could be with extra locks, security shutters, additional CCTV coverage, or even onsite security personnel.
Fire Safety
- Identify all sources of ignition, fuel, and oxygen throughout your commercial property. These are the factors that could cause a fire to break out, or to spread.
- Identify who would be at risk from a fire, paying particular attention to anyone who might be unfamiliar with your premises, or anyone who might work alone or in an isolated area.
- Determine how you can manage, mitigate, or eliminate each of these risks. This could be through setting maintenance schedules for all onsite equipment while investing in new fire safety systems, such as alarms, sprinkler systems, and smoke extractors.
For more information about fire safety for commercial properties, read our guide to warehouse fire safety risk assessments. While this guide is specifically for warehouses, it covers the essential aspects of fire risk assessments that could also apply to other types of commercial properties.
Flood Protection
- Identify the possible causes of a flood. Even if your commercial property is not located on a flood plain, flooding could still occur as a result of burst or leaking pipes, surface water run off or overflowing drains.
- Consider how you might mitigate any possible losses caused by flood. This might include storing particularly valuable stock or equipment on higher shelves, and signing up for government flood warning services so that you can take steps to secure your property as early as possible.
- Outline some flood response procedures for your property, including an evacuation plan. You could also invest in flood defence equipment for use in an emergency.
We have a guide to preparing certain kinds of commercial properties for flooding. While this guide refers explicitly to retail premises, again, the principles it outlines could also apply to other kinds of commercial properties.
Property Maintenance
- Conduct a thorough survey of your property’s structure. You may need to appoint a specialist surveyor to help you with this. Look for any signs of subsidence or other structural issues, and consider how you might address these issues.
- Identify any equipment or systems within your property that might require ongoing maintenance, including electronics, machinery, and security and fire safety systems.
- Outline a maintenance schedule for all of the above, which should include a schedule for replacing certain items such as fire extinguishers.
Recording and Reviewing Your Risk Assessment
Finally, you should:
- Record any steps you took to address the risks you identified in your risk assessment, along with any additional risk management measures you identified.
- Determine who is responsible for overseeing any risk management procedures you identify, along with a timeframe for completion.
- Outline a plan for periodically reviewing your commercial property risk assessment. At minimum, you should do this once a year, or whenever you renew your commercial property insurance. But you should also review your risk assessment whenever you make any significant changes to your operations (such as when you lease to a new commercial tenant), or following any incident such as a fire, a flood, or a break-in.
Get The Right Insurance Cover For Your Commercial Property
James Hallam is an independent Lloyd’s broker with a dedicated team of insurance professionals who care about protecting your commercial property.
We can help you get the specific cover you need for your commercial property. We can also show you how to evidence your risk management procedures to your insurer, which could help you make a saving on the cost of cover.
Learn more about our specialist commercial property insurance services.