The FM Global Research Campus allows constant re-evaluation of property risks.

Traditionally, many insurance companies have taken the view that losses are inevitable and that actuaries can design robust statistical models to develop competitive products and deliver underwriting profit.
This approach can be effective for high-volume, low-value sectors such as motor or home insurance, but can be ineffective for commercial and industrial property insurance, where a single property may be valued at billions of dollars.

An alternative model that has proven effective is by marrying knowledge-based underwriting and property loss prevention engineering, built upon the belief that the majority of all loss is preventable. Such a model focuses on understanding a client's business, developing accurate insight into the most threatening property risks facing their organisation and preventing a loss rather than recovering from one. This focus helps saves money for the insurer and its clients and is comprised of a three-stage risk management process:

- prevent an incident from happening in the first place;

- control any incident that does occur; and

- mitigate the impact of an incident (it is only here in the process that the important concept of insurance is introduced).

For such an approach to be effective, ongoing scientific research is needed to discern the continually evolving property risks that can threaten a business in an ever-changing global economy. Since its beginnings in 1835, FM Global, a mutual insurance company, has been committed to helping clients prevent and mitigate property losses and maintain the continuity of their business operations. As part of that commitment, the company has recently opened a new $78m research campus designed to gain an even greater awareness of the risks facing commercial and industrial properties.

One of a kind

The state-of-the-art centre opened in September 2003 and is the largest of its kind in the world, encompassing 1,600 acres in rural West Glocester, Rhode Island, US. The FM Global Research Campus comprises a number of sophisticated laboratories for studying the devastating impact fire, wind, smoke, electricity, explosions and other perils can have on a business.

Every day, scientists at the research campus are burning things down, blowing things up and giving things a good beating to develop new solutions to help clients prevent or reduce property loss and business interruption.

The cornerstone of the research campus is its fire technology laboratory, larger than the size of two football fields and capable of replicating warehouse-size fires of up to 1,100 degC. This facility enables researchers to assess the hazards of countless types of storage arrangements. In the past decade, for example, the height of warehouses, particularly in Europe, has increased, so the facility's large burn laboratory can replicate fires up to 60ft (18m) high, allowing researchers to study the effects such changes can have on business property.

While the natural inclination is "never play with fire," the facility allows scientists to study the characteristics and nuances of fire itself, and to use that understanding to design and/or enhance sprinkler systems and other fire prevention and suppression systems.

The FM Global Research Campus also houses a natural hazards laboratory, for studying the risks that Mother Nature inflicts. Here, researchers focus on determining the performance of all types of building materials including doors, wall assemblies, windows and roofing systems by subjecting such materials to replicated hurricane-force winds, hail, rain, wind-blown debris and other perils - all within the confines of the laboratory.

Additionally, work conducted at the campus' electrical hazards laboratory focuses on testing machinery, switches, process control instrumentation, and industrial material-handling equipment for use in hazardous locations, like dusty or gaseous environments, to ensure such devices will not cause an explosion.

New hazards, new exposures

The benefits of having the ability to conduct such research are particularly evident when advances in industry and technology launch whole new industries and products, and create hazards never before imagined.

The invention of the computer chip, for example, marked the first time an industrial process had ever packed so much value onto so small a product under such infinitely small manufacturing tolerances. As a result, a spec of dust or a flame the size of a thumb in such a clean and sensitive manufacturing environment could cause a catastrophic loss resulting in business downtime, supply chain interruption and loss of market share.

To understand and develop risk management solutions for this industry, research conducted by FM Global helped underwriters understand the true risk quality of different facilities and led to the development of new engineering standards, now adopted throughout the industry, for making computer chip manufacturing facilities inherently fire-safe.

Product testing

The work conducted at the FM Global Research Campus also includes objective product testing and certification of building materials, electrical equipment and fire protection systems. Products or services that meet FM Approvals' rigorous property loss prevention standards earn the FM Approval mark.

Sophisticated underwriters and property owners know using FM Approved products can significantly reduce or prevent property loss because such products conform to the highest standards that are backed by scientific research.

The knowledge gained from this research and testing helps FM Global develop more advanced engineering solutions as well as loss prevention training programs for its clients. Furthermore, it helps the company's underwriters make more informed decisions on retention, capacity and rates.

Most importantly, such research puts clients, dedicated to property loss prevention over risk transfer, in a stronger position to lower their cost of risk by using the best available advice to build and protect their facilities in such a way that they protect their bottom line.