Mass timber in the USA – part 1

Q&A with Jake Concannon, Vice President at Gallagher Global

Many nations across the world have adopted timber as their primary building material, yet the UK lags well behind. Over the coming months we will be asking why this is the case, with a series of blogs that highlight international perspectives, best practice and inspirational projects. Kicking off this global tour, our first instalment takes a closer look at the arguments and reasoning behind America’s choice of timber ahead of other materials.

Since its beginnings in 1927, Gallagher Global has been a leader in the field of insurance brokerage, risk management and human capital consultancy. Operating in more than 150 countries, the company has tremendous insight into the different risks associated with various building materials, including structural timber. We recently caught up with the company’s Vice President, Jake Concannon to learn more about how the insurance sector perceives structural timber solutions and its role in the American construction market.

What is the current state of the construction insurance market in the USA?

It’s been a really dynamic couple of years, with a lot of ups and downs. It’s clear that climate change is starting to affect things in America; from wildfires in California to the ‘big freeze’ in Texas. All of this is driving liability pricing up and having a big impact on the construction insurance world. In particular, recent events are affecting the insurance of projects involving wood frame construction. Unfortunately, there remains a misconception amongst insurance companies that wood frame construction projects will inevitably lead to claims, which is putting many parties off.

Right now, most insurance companies have very little capacity to cover wood frame projects. So, if you’re a contractor and owner and you’re looking to build with wood, then there’s only a small number of companies you can go to for cover. At Gallagher Global, we’re looking to change this and have been focused on helping light-frame wood construction buildings, which use cross laminated timber (CLT) to become more commonplace. In turn, that means comparing the risks associated with CLT construction with other materials, such as concrete and steel.

That’s great to hear, so what specifically are you doing to help this area to grow?

As I say, it’s an area of great focus for myself and for Gallagher Global. We’re working to educate insurers about the benefits of the material and supplying them with all the relevant information and data. Right now, it’s an especially hard market, but this normally happens in the aftermath of a major event. In general, hard markets tend to only last for a year or two before things start to ease up a bit. I think the general sentiment amongst insurers is that this period will soon come to an end and we’re glad to have helped in that endeavour. We’re most encouraged with our conversation with AXA, who seem to have good capacity to accommodate more CLT projects.

What was the main focus of your conversations with AXA?

We wanted to highlight some of the common misconceptions around mass timber solutions and explain why they were incorrect. It first started with a 30-minute call between both companies. During this conversation, we introduced AXA to one of our clients who has a major mass timber division in the North West of America. We had engineers from that company explain how major mass timber systems perform against steel and concrete. We also detailed the international building codes that have been adopted in this country in recent years and explained how they’ve been applied to mitigate the risk of fire and water damage to these projects.

Then AXA brought in its reinsurance partners to further discuss changing its position. In the insurance world, you have the main insurers and then behind them are the banks who really pull the strings, and create the rules on what insurance companies can and can’t do. With AXA’s help, we were able to get all parties into a Q&A forum and work through some of the issues. It was a lot of work, but the results were very positive. After all that, AXA ended up issuing a press release detailing its decision to change course on the issue. Now, we’re looking to repeat this success with other insurers and are using AXA’s decision to leverage those results.

What’s delaying other insurance companies in coming to this conclusion?

I think the concept of wood building solutions not being a fire risk is hard for some people to grasp. Likewise, there has been a lot of other things going on in the insurance world recently and CLT hasn’t been pushed enough as a result. As such, there needs to be more education on it and in turn, there needs to be more buildings built from the material. At that point there will be more data to accumulate for actuaries to then figure out what the risk of the material is.

Do you get many clients coming to you with plans to build in timber?

Yes we do, but it’s mostly from the owner side. I’m based in the Bay Area and we recently had Google announce a $200 million CLT pilot project on its campus. More broadly, the company has announced a $7 billion investment into mass timber in the US. We’re also seeing a lot of universities across the United States using mass timber. If you look at the smarter companies and institutions across the country, then it’s clear the direction they are going in and it’s timber. So the demand is there, especially on the West Coast. Like in Britain, we have a huge housing crisis in California and the prefab ability of mass timber makes it an ideal solution.

To read the second part of this Q&A with Jake Concannon, please click here.