FM Global: Equipment failures a leading cause of property losses for businesses

JOHNSTON – Equipment breakdowns now rival fire loss in both frequency and severity of commercial property insurance claims, according to a new analysis of large risk losses reported last year to FM Global.

Johnston-based FM Global, one of the world’s largest commercial property insurers, said among the company’s 232 large risk losses in 2018, 65 were the result of equipment breakdowns.

PBN Branded Content

Facing the Holidays with a Cancer Diagnosis

The holidays are often painted as a time of joy, tradition, and togetherness. But for…

Learn More

Such cases accounted for 28% of FM Global losses across all industries last year, based on gross loss dollar amount.

Large risk losses are those greater than $3 million in cost, excluding natural disaster losses.

“A large number of those equipment-breakdown losses last year could have been prevented,” said Brion Callori, FM Global senior vice president of engineering and research. “However, in a booming economy, many companies aren’t necessarily taking their facilities offline for preventative maintenance, often choosing instead an expensive roll of the dice rather than a more conservative bet.

“Unfortunately, that strategy only works for so long before problems arise that can lead to expensive repairs, decreased revenue and potential market-share loss for companies that can’t fill orders when their equipment breaks,” he added.

Among the findings:

• Sixty-two percent of equipment breakdowns were due to lack of maintenance, accounting for three-quarters of all equipment-loss claims.
• Twenty-five percent of equipment-breakdown losses occurred after repairs were made or during startup.
• Nearly half of all equipment-breakdown losses had a significant “human element” impact or influence.
• Operator training was a factor in 43% of equipment losses, highlighting the need for enhanced training and knowledge transfer as the industry sees significant turnover due to demographic changes.

“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,” Callori said.

Scott Blake is a PBN staff writer. Email him at Blake@PBN.com.