Sharon Paterson | Why fire risk management is non-negotiable

Fire is widely recognised as a primary business risk in South Africa, frequently resulting in severe operational disruptions. Such incidents often compel companies to cease operations for extended periods, leading to prolonged downtime and profound long-term financial consequences.

A business may find itself unable to generate revenue even if the property is not destroyed. Many fires originate from unnoticed electrical risks, ageing infrastructure, inadequate maintenance, or gaps in safety compliance. Factories, in particular, are classified as high-risk environments where fires frequently stem from electrical failures or human error.

Fire-related property damage claims are typically substantial due to the high value of industrial premises and infrastructure. Common causes include electrical faults, such as defective wiring and inadequate earthing. While in some cases the property can eventually be rebuilt, fire incidents threaten the long-term financial sustainability of the business. The loss of income during the recovery period often has a definitive impact on a business's ability to remain viable.

Most businesses that experience a serious fire may require a significant time to recover, and some never fully regain their former standing; some are forced to close within months. Others may survive financially but lose intangible assets developed over decades, such as brand trust and stability. Beyond damaging critical assets, machinery, and stock, fire incidents fundamentally put employees’ lives at risk.

In this context, business interruption (BI) insurance is critical for mitigating financial losses. Business Interruption cover is specifically designed to compensate businesses for lost income and fixed ongoing expenses when operations are halted due to covered perils, such as fire.

Business Interruption cover remains essential even for non-manufacturing businesses. Professional services, including legal practices, consultancies, and accounting firms, incur immediate financial losses when they are unable to access files, digital systems, or client-facing facilities. A business interruption claim is typically lodged when direct physical loss or damage to insured property renders the premises unusable or significantly impairs operations.

Prevention is always more effective than recovery

Insurers play a proactive role in loss prevention by encouraging clients to implement robust maintenance regimes. It is also important for clients to understand fire classifications to choose appropriate extinguishing methods, thereby preventing further damage, injuries, or fatalities. Conducting regular fire drills, safety training, and emergency response awareness will ensure that employees are well-prepared for potential incidents.

Fire safety is not merely a reactive measure for emergencies; it is a fundamental component of proactive risk management. Securing a premises before a crisis occurs can mean the difference between a minor setback and a catastrophic loss. Hazards often remain hidden until conditions allow them to escalate. Consequently, clients must maintain safety equipment as their primary line of defence. One should never assume an extinguisher is functional simply because it is mounted; pressure gauges must be inspected regularly. If the indicator is not firmly within the green zone, the unit requires immediate servicing or replacement. Clients need to maintain functional smoke alarms, testing them at least monthly via the physical test button.

Clients who are affected by a fire disaster must fully understand how their insurance policies, particularly BI cover, provide the financial relief. Brokers serve as vital strategic partners who help businesses mitigate the existential threat of fire by conducting comprehensive risk analyses to uncover operational vulnerabilities, ensuring clients obtain appropriate cover. Proactive investment in risk mitigation is now not just a safety imperative, but a critical financial strategy to ensure long-term sustainability in an increasingly unpredictable operating environment.

Working with their brokers, clients should carefully assess their required level of indemnity, as certain industries, such as those working with hazardous chemicals, can be more susceptible to fire. Clients who prioritise prevention are better positioned to limit both physical damage and the resulting scale of business interruption.

*Sharon Paterson, CEO of Infiniti Insurance Limited