Making the Case for CLT to Improve Terms & Conditions in Builders’ Risk Policies

Known for its sustainability, strength and visual appeal, cross-laminated timber (CLT) is having a moment in the construction industry. Builders are recognizing it as an arguably superior alternative to frame construction. Consisting of planks of glued and layered wood joined together at perpendicular angles, CLT produces wood panels of great structural rigidity, but weighing between one-third and one-fifth as much as concrete structures. It also has a reduced climate impact compared to concrete: wood is a renewable resource that traps carbon in the structure, while concrete, because of its fossil fuel consumption during production, is the third leading contributor of carbon emissions.

 

CLT also isn’t a new concept. Early experiments began in the 1970s, and by the 1990s researchers in Switzerland were developing initial CLT prototypes. Now, it competes with steel, brick and concrete in Europe, even for high-rise buildings. Stateside, adoption has been slower. Despite CLT projects like Carbon12 – an eight-story building built in 2015 in Portland, Oregon – and increasingly taller examples in places like Wisconsin, Arkansas and Washington, CLT has yet to be used more broadly. What’s holding it back? It has less to do with builders than it does the insurance industry.

 

“Much of insurers’ reluctance has to do with a lack of awareness as to CLT’s testing and safety standards,” said Lori Montoya, underwriting officer at The Hartford. “Currently, the U.S. has standardized construction codes used uniformly among various entities involved in building construction. CLT is one material that doesn’t quite fit in any of those established codes.”

 

Now, the construction industry is pushing insurers to better understand how CLT stands up in various loss scenarios — particularly fire and earthquake events — so that more affordable terms and conditions can be applied for builders’ risk policies, and CLT can become a more mainstream building material.

 

With the raging California wildfires in recent years still fresh in insurers’ minds, fire risk is a major question for CLT vs. frame construction.  “It’s a valid concern, as CLT is still a wood product,” said Montoya. “However, large, compressed wood CLT panels are actually difficult to ignite.”

 

All North American CLT suppliers have fire-tested their CLT panels to meet ASTM E119 standards for a two-hour fire resistance rating. CLT’s fire-resistance performance shows that it consistently chars in a predictable manner, and the interior layers are shielded to help a CLT building retain its structural integrity. In addition, starting in 2021, all CLT panels are required to use adhesives that have a greater heat resistance in order to further improve CLT’s fire performance.

 

CLT’s performance in earthquakes has also been tested extensively, and it has demonstrated a consistent ability to hold up during seismic events. Contrast that with concrete buildings, which crack and must be demolished and replaced if they sustain seismic damage. Part of CLT’s earthquake resistance has to do with its lighter weight compared with heavier concrete structures: the damage a building takes in an earthquake is proportionate to a building’s weight.

 

Given its compressive strength and demonstrated safety and sustainability, CLT is certainly a game-changing material for the construction industry. But broader adoption depends largely on the insurance industry’s ability to step outside of what’s comfortable and better understand CLT’s risks and exposures.

 

Working with reinsurers to better understand the pros and cons of CLT may also help support the wider adoption of this building material and eliminate insurers’ trepidation in providing more favorable insurance terms. “Partnering with reinsurers to share exposures can be a good way to avoid taking on too much risk,” said Montoya. “For example, an insurer may only accept $10 million of the $40 million total insured value of a CLT project, and the remaining $30 million could be spread among a number of reinsurers; however, when a high level of comfort is reached among primary carriers and reinsurers alike, the number of insurers required to cover a CLT project can be reduced or kept manageable.”

 

With CLT bringing construction to the brink of a revolution, forward-thinking insurers like The Hartford are helping propel it by taking on the role of educators in the industry. “We at The Hartford understand the benefits of CLT, and we have a responsibility to educate the market about it for so many reasons — long-term sustainability and improving quality of life among them,” said Montoya. “CLT will play a large role in the future of the construction industry, and it’s in everyone’s best interest to fully understand it.”

 

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