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Insurance premiums in focus after The Address Downtown Dubai fire

Insurers are set to review building premiums after the New Year’s Eve blaze at The Address Downtown Dubai.

The fire at the hotel was the latest in a string of building blazes in Dubai last year, including ones at The Torch Tower at Dubai Marina in February and the Regal office tower in Business Bay in November.

Mohammed Hesham, operations manager of Abu Dhabi-based Capital Shield Insurance Brokers, said that the impact on Emaar’s own premiums might not be significant as the company owned thousands of buildings and could take a commercial decision to switch insurers if premiums rose by too much.

However, he believes that insurers will look more closely at the type of materials used on a building, and set higher premiums for those clad in aluminium composite panels.

“Insurance is a pool. We all pay into the pool, and whoever has a claim takes from this,” said Mr Hesham. “But let’s say you have more risk than me – you should pay more. If an insurer notices that claims from BMW owners are higher than others, they will increase rates for all BMW cars. Here it is the same situation. If they notice that these types of buildings have more of a tendency for claims, then it will have an impact on the whole market.”

Michael Rafter, the executive vice president of general insurance at Oman Insurance Company, which insured the Torch Tower, said that given the quantum of loss faced from the Address Downtown fire, “it may impact property insurance premiums”.

He said: “But this would be specific to buildings with combustible cladding only, and it is not possible to predict how much [premiums will rise].”

Mr Rafter said that Oman Insurance Company had learnt from the Torch Tower fire that even a minimal amount of combustible material could lead to devastation. “It has made us more cautious in our approach towards insuring buildings that utilise any kind of flammable cladding.”

Garry Taylor, the Mena managing director of the specialist broker Bowring Marsh, believes that the impact of The Address Downtown fire on the market for building premiums will not be significant.

“In our opinion, a single loss incident represents a very small percentage of the market and only a dramatic shift in market capacity would shift premiums,” Mr Taylor said.

Alison Fenech, head of general insurance at Dubai-based Nexus Insurance Brokers, agreed, stating that premiums did not rise after other Dubai fires last year.

“We have seen more of an increase in awareness than premiums,” she said.

Ms Fenech said that although individual insurers may increase rates if they own more than one building, the market as a whole is not likely to be subject to rate rises as a result of this incident in isolation.

She added that the frequency of fires was more important than a single, high-profile event. “If you have 10 fire incidents in a year amounting to Dh20 million, it is more likely to increase premiums than one incident in a year amounting to Dh25m,” said Ms Fenech.

Sam Thakker, managing director of Earnest Insurance Brokers, said that although there may be a few “knee-jerk reactions” from insurers looking to capitalise on the incident, the fact that it happened so late in the year meant that across-the-board premium increases were unlikely as most insurers had already set rates for 2016.

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