Advisen FPN

Advisen Front Page News - Thursday, March 17, 2022

Mass timber gaining popularity for sustainable building, but insurers remain cautious


Mass timber gaining popularity for sustainable building, but insurers remain cautious

By Alex Zank, Advisen

A growing desire to build and operate greener buildings has led to the rise of sustainable practices -- mass timber is one trend that’s gaining traction in the U.S., and experts predict it will only become more common.

The sustainable building method grabbed headlines in recent years for its use on projects such as Walmart’s corporate campus in Bentonville, Arkansas, and the Ascent building in Milwaukee, which is the world’s tallest timber structure.

But insurers largely remain cautious of mass timber – layers of wood laminated together under great pressure to create structural elements – as an alternative to steel or concrete. They question the full extent of its risks, and say there is not enough data to provide them with the answers.

“It is a relatively new type of construction method, and there are just a lot of unanswered questions on mass timber,” said Katherine Klosowski, vice president of natural hazards and structures engineering of FM Global, one of the world’s largest commercial property insurers, in a recent interview with Advisen. “FM Global has been investigating and doing some research on this, but without having good answers, we’re still a bit hesitant to jump into the mass timber area.”

Clients using mass timber need either builders risk or property insurance (or both) but may face an insurance capacity shortage. And absent of sufficient claims data, many carriers also lump mass timber into the same category as traditional lumber construction.

Sedat Kunt, national construction property leader of Marsh, told Advisen he estimates a maximum capacity of $200 million for U.S. mass timber projects. The brokerage has a handful of clients that have used mass timber on projects, albeit for aesthetic purposes rather than structural.

“The capacity in comparison to a noncombustible project [those using materials like concrete or steel] is significantly low,” he said. “The main reason for that is this is a relatively new construction method in the U.S. The insurance market’s exposure to such risk is very limited, in terms of construction and actually built assets.”

Manufacturers make mass timber in several ways, according to commercial property and liability insurer Zurich North America. Cross-laminated timber (CLT) is a series of lumber components stacked crosswise in layers and combined using a powerful adhesive. Glue-laminated timber (GLT or glulam) is similar to CLT, except the timber pieces are all layered in the same direction. Mass timber can also be made using nails or wooden dowels.

One of the biggest advantages to mass timber is its reduced environmental footprint. Substituting wood for fossil-fuel intensive materials such as concrete or steel reduces greenhouse gases, according to wood-construction consulting firm WoodWorks.

Zurich in November launched a new mass timber builders risk offering with up to $50 million in capacity. This is available both as a standalone piece or as part of a master builders risk program

“In terms of clients right now, we've probably either quoted, bound or in some way shape or form engaged our mass timber strategy with probably well over a dozen clients so far in just the past few months,” Patrick McBride, head of construction property for Zurich, told Advisen.

That’s not to say Zurich wasn’t covering mass timber projects prior to November, McBride added. But before introducing the new product, Zurich covered mass timber through its light wood frame program. This program, he said, was limiting and also did not recognize the differences between the two building methods.

Upon introducing its new mass timber product, Zurich said the building method has proven through testing that it is more fire-resistant than traditional light wood framing.

But insurers say they need more data on the full effects of fire, water, and smoke damage on mass timber construction.

“The situation that we’re thinking about is, maybe there’s a small fire in the building and the automatic sprinkler system goes off,” Klosowski said. “When that happens, the sprinklers are controlled so they only go off in that small area, but that water can then travel down the building to every level until it hits the bottom floor. And what’s that water doing to the mass timber itself when it hits it?”

FM Global insures mass timber buildings in specific situations, Klosowski said. Some clients, like large universities or hospital complexes, may have one or two mass timber buildings as part of a larger portfolio.

Clients applying for mass timber coverage may find a lengthier, more detailed underwriting process. For instance, Zurich has quality standards of mass timber suppliers when underwriting builders risk coverage, though it does not do this on projects built with concrete or steel, McBride said.

Research shows mass timber usage is growing, though it is far from widespread.

“The further utilization of these sustainable materials will only increase, in my mind, as the global economy further embraces the need to reduce the environmental footprint and they ensure that environmental, social and governance measures and targets are met,” Kunt said.

The global CLT market reached a volume of nearly 1.9 million cubic meters last year, and could reach roughly 3.8 million cubic meters by 2027, according to a report from market research company IMARC Group.

As of December 2021, more than 1,300 mass timber projects had been constructed or were in design phases in the U.S., according to WoodWorks. The states with the highest concentrations of mass timber projects are along the West Coast: California, Oregon, and Washington. Other states with a sizable number of mass timber projects include Florida, Massachusetts, New York, North Carolina, and Texas.

According to a global survey of construction industry professionals from Dodge Data and Analytics, mass timber is the least-used green building system among all surveyed industry professionals globally. Only 15% of respondents used mass timber on projects.

However, the use of mass timber could double in the near future, as 28% of global respondents said they expect to use the building method in the next five years. One-quarter of U.S. respondents said they expect to use mass timber in the next five years.

McBride said insurers may become more willing to underwrite the risk as builders complete more mass timber projects successfully and free of loss.

“We expect it to continue to be a trend,” McBride said. “It’s also coupled with the fact many organizations – both owners and contractors, as well as insurance carriers – are looking for ways to support ESG and sustainable mechanisms, and this is widely seen as one of the most popular or at least one of the most immediate solutions to some of those requirements.”

Reporter Alex Zank can be reached at

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