Equipment breakdown claims grow in booming economy: FM GlobalPosted On: Jul. 9, 2019 2:46 PM CST
Equipment breakdown now rivals fire loss in both frequency and severity of claims, driven by the booming economy and human influence, according to an FM Global analysis of large property-related losses greater than $3 million released Tuesday.
Of the 232 large risk losses reported to the Johnston, Rhode Island-based insurer last year, 65 were due to equipment breakdown resulting in 28% of its losses across all industries in 2018 based on gross loss dollar amount, the company said in a statement.
“During the last five years we’ve seen increasing numbers of losses from equipment breakdown, especially in the pulp and paper, chemical, electric utility and mining industries,” Brion Callori, FM Global senior vice president of engineering and research, said in the statement.
Lack of maintenance was a factor in two-thirds of equipment breakdown losses in 2018, while nearly half had a significant human element impact or influence, FM Global said.
“In a booming economy, many companies aren’t necessarily taking their facilities offline for preventive maintenance,” Mr. Callori said in the statement.
Operator training was a factor in 43% of equipment losses, highlighting the need for improved training and knowledge transfer as the industry sees significant turnover due to demographic changes, the insurer said.
Large risk losses are those losses greater than $3 million reported to the insurer that do not include natural hazard loss.