Iceberg basements and their inherent risks are one of my favourite topics (I know, a bit ‘insurance nerd’ but bear with me). They, and their owners, are often featured in the news and, more recently, the London Borough of Kensington and Chelsea announced new restrictions on the developments.
It may not surprise you hugely that these subterranean extensions come with a specific set of risks some of which you may not imagine until they happen. They begin early on at the construction stage and follow right through to the time when the basement is created and often filled with wonderfully expensive fixtures and contents. In this blog I thought I’d highlight some of these risks and how brokers and clients can help mitigate them.
At the construction stage, it’s obviously important to check whether the proper planning permissions are in place as well as the proximity of the extension to local services, for example the underground lines in London, and most importantly, other people’s property. Another essential thing to think about is whether adequate insurance cover is in place in case the contractors go bust or there is a problem with the work. A company may have liability cover for say £10m but damages might come in even higher at say £20m or £30m for homes of the size and stature we are talking about here.
There are also risks once the iceberg basements have been built. When you consider what has gone into their build and kitting them out - often that’s gyms and cinemas with fine materials and fabrics - it’s easy to see how the value of a property and contents can dramatically increase. The hydraulic chairs in an underground cinema similar to those at Disney’s theme parks cost a cool £5-10k each – imagine some of those alongside a state of the art entertainment system, art and fine furnishings and it’s easy to see how values can climb. These valuable fittings and contents can fall victim to any of the household perils, but most specifically water.
These extensions are often nestled underneath a garden or terrace where water can easily seep in from above say from a blocked drain. It’s important to understand whether the property has been properly ‘tanked’ as either storm or foul water can wreak real havoc. Anti back flow devices on drains can help prevent some ingress of foul water when public sewers can not cope with a sudden surge of storm water, whilst a pump alarm will signal an early warning so you have time to move your contents to a higher place. Some people choose to have their drains and gutters professionally cleaned on a regular basis which can also help reduce the risk of blockage.
It’s important to consider what the basement is used for too. Some homeowners house sophisticated heating systems for their homes and swimming pools worth hundreds of thousands of pounds located underground. Equipment like this catching fire or suffering water damage can be catastrophic as well as inconvenient. Others may choose to build cinemas and gyms or additional living spaces like dining rooms underground. I’ve also seen the basements of motor enthusiasts with the capacity to store up to 18 vehicles – almost like a series of little Matchbox cars on racks. This creates a real fire risk as they are potentially full of some 60 litres of fuel each.
Specialist high net worth insurers have had an understanding of these iceberg risks for some time now. Every risk is different and each client needs to be considered based on their specific set of circumstances. What stays the same though is that good insurers and brokers will try to provide risk management advice and solutions for clients from the outset of extension projects right through to completion and beyond.