Managing the Economic Risks of Fire.
Managing the Economic Risks of Fire.
(7230 K)
Lippiatt, B. C.
; 10 p. March 1992.
Keywords:
risks; economic factors; costs; fire safety; fire risk;
risk management; fire models; fire insurance; decision
analysis; fire losses; damage; fire protection
Abstract:
The cost of purchasing, installing, and maintaining fire
safety systems constitutes a significant and increasing
share of the owning and operating cost of buildings. The
National Fire Protection Association (NFPA) estimates
fire safety investment costs to range between three and
nine percent of new construction costs, depending on
construction type. Selecting the "best" fire protection
investment package is a complex problem that involves
difficult tradeoffs between reducing and transferring
exposure to fire loss risks (risk exposure). Risk
exposure may be reduced, and even avoided, by investing
in fire protective devices, building design, equipment,
and furnishings, and improvements in fire safety
education and operating procedures. Risk exposure may be
transferred by purchasing fire insurance. By optimizing
the tradeoffs among reducing and transferring risk
exposure, substantial cost savings could be realized
while maintaining or even raising current safety levels.
Fire risk management means controlling risk exposure.
Typically, risk exposure may be neither fully avoided
nor fully transferred. They may not be fully avoided
because the costs and aesthetics of making a building
completely fire safe are prohibitive. They may not be
fully transferred because insurance does not cover all
losses from a catastrophic fire. For many businesses,
the indirect, or business losses from fire are the most
troublesome and enduring. A major fire can cause
business interruption and market share losses which may
result in crippling a company's growth or even
threatening its survival. Indeed. fully 40 percent of
insured small businesses that suffer a major fire never
reopen.
Building and Fire Research Laboratory
National Institute of Standards and Technology
Gaithersburg, MD 20899