Jeffrey Sciaudone discusses the way building codes benefit re/insurers, with an emphasis on conditions in the US.

Building codes have a substantial impact on the way buildings perform when natural disasters strike. But there usefulness does not end there; they also increase the predictability of losses ahead of time and can aid insurers and reinsurers in the evaluation of assets at risk. Knowledge of building codes and their enforcement enables the insurance industry to make better business decisions.

The building code in place, the state or local amendments to the code and means of enforcement all have a substantial impact on how buildings will perform in the event of a disaster. Many tools exist for insurers to incorporate the effect of building codes into their day-to-day business to better quantify and minimise the risks they take.

In the US, model building codes are developed at a national level with input from interested parties. Individual states and municipalities then adopt these codes and enforce them at local level. The codes incorporate the latest construction knowledge and science, so that the information will eventually trickle down to each state and community as they are adopted and enforced.

The three most prevalent model codes have been the National Building Code, Uniform Building Code and the Standard Building Code. These codes have now been combined to form the International Building Code, which was published in 2000 for the first time. This code is considered to be the most technically sound and up to date for all regions and climates.

Hurricane protection
One of the biggest advancements made in the model codes in the last few years is in the enhancement of hurricane protection measures. This includes the incorporation of the latest wind speed maps, pressure calculations and wind-borne debris protection requirements for buildings in areas most vulnerable to hurricane force winds. Using these codes to design buildings leads to a higher level of performance and predictability in the face of extreme weather events.

The most recent model building codes also consider the latest in seismic understanding as generated by the Building Seismic Safety Council through the National Earthquake Hazard Reduction Program (NEHRP). Again, these requirements offer designers the best chance to ensure performance and predictability in the face of extreme disaster.

State and local adoption
When a state chooses to adopt a new building code, the process starts an evaluation of the model building codes and legislation. The adopting legislation usually empowers a building code council to oversee the process and implement the code, and includes language relating to the allowable statewide and local amendments. In some cases, these amendments may only strengthen the code. In others, the building code council and local jurisdictions may be able to make any changes they see fit.

It is in the second instance where decisions can have a negative impact on disaster resistance. A case in point is the recent adoption of the International Building Code in North Carolina. One of the first actions of the building code council was to remove the provisions calling for protection of glazed openings from wind- borne debris along the coast. To help make the case to restore these provisions, the insurance industry funded research through the Institute for Business & Home Safety (IBHS) to demonstrate their importance to the North Caroline Building Code Council. At this time, the decision is still pending from the building code council.

Code enforcement
Strong building codes are not enough, however. Without proper enforcement, their life - and property - saving benefits would never be realised, as recent earthquakes in Turkey have demonstrated. While the building codes in place in Turkey are very similar to those in California, poor enforcement led to many deaths and large property losses. In order to better measure the effectiveness of enforcement as well as the codes in place, the US insurance industry developed the Building Code Effectiveness Grading Schedule (BCEGS), which is currently managed by the Insurance Services Office (ISO).

As a part of the BCEGS programme, ISO regularly evaluates every building department in 49 of the 50 states (Kansas is the lone holdout). This evaluation looks at everything from the adopted code to the depth of service provided by the department. For example, the survey considers the size of the department in relation to the amount of building activity in the area to ensure that building officials are not spread too thinly to operate effectively. The survey also penalises communities where local amendments reduce the strength of the building code.

In addition to the survey in 49 of the 50 states, rate filings have been made and approved in 48 of the states (filings have not been approved in Texas). This is a means for insurers to give rate credits for buildings in jurisdictions that score well on the BCEGS survey. These credits are optional in all states except Florida, where they are mandatory.

`Built to code'
In some instances, it is not enough to ask if buildings are `built to code'. The next question should be: `How do they meet the code?' One such example can be found in the new Florida Unified Building Code. The code requires that all buildings constructed on the coast (and somewhat inland as well) either protect their glazed openings with impact-resistant coverings or be designed as `partially enclosed'. This is a very important distinction for insurers to consider before making policy and rate filing decisions. Here's why.

When a building is designed as `partially enclosed,' the designer assumes that windows and doors will fail during a hurricane, and designs the structure of the building to withstand not only wind pressures from the outside, but from the inside as well. While this design helps to keep the whole structure together, it offers no protection to the interior finishes and contents from the wind and water that can enter a building following a window failure. That's why the option to protect a building's glazed openings with storm shutters or impact-resistant windows will have a much more beneficial effect on total insured losses from a hurricane event.

Research on the subject shows the dramatic effect that the choice of protecting glazed openings can have on the reduction of hurricane losses. The results of this research are available from the Florida Department of Community Affairs in a report entitled Development of Loss Relativities for Wind Resistive Features.

Extra disaster protection
While strong, well-enforced building codes provide a solid baseline of performance for all buildings in terms of natural disaster and fire resistance, their main focus continues to be life safety and not necessarily property protection. The concept of life safety is a common justification for local amendments that reduce the strength of model building codes. Their proponents generally argue that some hurricane protection features are not necessary as life safety issues because people will evacuate if a storm is making landfall.

In order to take residential building protection to the next level, the US insurance industry has developed the `Fortified...for safer living' programme through IBHS. This voluntary compliance programme includes enhanced structural requirements to ensure property protection as well as life safety, and additional inspections verify compliance with the code-plus criteria.

This `all perils' programme is currently in its pilot stage in the state of Florida and includes criteria for windstorms (hurricane and tornado), flood and wildfire. Unlike the Florida Unified Building Code, it has no option to design homes as `partially enclosed'. Homes designated as `fortified' must include impact-resistant windows or shutter systems to protect the entire building from hurricane loss.

Water damage, hail and earthquake criteria are currently being developed. By the end of the year, the `fortified' programme will expand into North Carolina, Texas and Oklahoma as well. This programme offers the homeowners greater peace of mind and an affordable option to provide additional protection for their families, possessions and properties from natural disasters.

Since new residential and commercial construction accounts for a small percentage of the US building stock, strong, well- enforced building codes are primarily a long-term property protection measure. But even in the short-term, there are significant gains to be derived. For example, Florida's new building code will greatly increase the disaster resistance of more than 100,000 new homes and commercial structures built each year in the state.

That is why such codes make a difference to the insurance industry, and there are many ways for insurers to put them to use in the day-to-day business of evaluating risk. Organisations like the IBHS and others can help provide tools and information to do so.

By Jeffrey Sciaudone
Structural engineer, Jeffrey Sciaudone, is Director of Engineering of the Institute for Business & Home Safety (IBHS). Based in Tampa, FL, the IBHS is an initiative of the insurance industry to reduce deaths, injuries, property damage, economic losses and human suffering caused by natural disasters.