Weathering the storms

With devastating weather events becoming more likely, and the aftermath of Storm Arwen exemplifying the challenges that companies face, Rory Gibson, of forestry and woodland insurance specialist Lycett’s, examines how a sound awareness of insurance options and pre-emptive strategies can take the financial sting out of future catastrophic onslaughts.

Siting, salvaging and structuring

The demand for wood has risen significantly in recent years, caused largely by the Covid-19 pandemic. The timber needs of furloughed workers eager to engage in DIY, along with supply issues and associated problems caused by HGV driver shortages, all combined to create cautious optimism within the forestry industry.1

When capitalising on this favourable climate, it is vital that those in the forestry sector are mindful of the preventable risks and the protection that is available.

Before a single sapling is planted it is important to choose a site that offers the least risk should storms strike. The extensive deployment of mechanisation may have simplified access to, extraction and removal of wind-blown trees, but this still remains a major consideration. Those located on inaccessible slopes or banks will inevitably constitute revenue loss, unable to be salvaged and left to rot in situ.

For landowners whose forests are at risk from storm damage, salvage retention insurance policies are an option that should be considered here. Retaining the salvage allows woodland owners to reduce their insurance burden, by only having to cover the gap between expected value and the salvage value. This is opposed to standard policies where the insurer retains the salvage and owners should insure the crops for their full market value.

Legislation currently requires forest compartments to be replanted within two years of a harvest. Owners are also restricted on the percentage of a crop that can be harvested at any given time presenting problems when it comes to trying to restructure forestry after a major wind event. Good risk management will include looking in detail at which compartments should be felled first, in order to minimise the wind exposure of those crops that remain standing.

The nature of plantations can also leave them further exposed, particularly to fire. Where owners are looking to achieve natural regeneration or low-density plantations and there is far more light reaching the forest floor, creating a habitat that allows flora and fauna to flourish. From an ecological perspective, such plantations are undoubtedly a boon, but from a risk management point of view there is the risk of a greater fuel load, increasing the likelihood of total losses.

Species choice is also a key factor for those considering carbon sequestration. The government’s support of this practice, which has woodland creation projects at its heart, has certainly aroused interest in existing and prospective forest landowners. Carbon farming reduces the amount of carbon being released into the air – through a process called soil carbon sequestration – and instead, converts it into organic matter and plant material.

The Woodland Carbon Guarantee (WCaG), the government’s £50 million scheme to increase rates of woodland planting, offers lucrative incentives. Landowners are given the option of selling cap-

tured carbon in the form of verified carbon credits, known as Woodland Carbon Units (WCUs). These can be sold on the open market, or to the government which offers a guaranteed price which, because it is index linked, reduces the long-term financial risks.

Such viability makes carbon farming an attractive proposition for many landowners, but it is important to consider which tree species you choose. Native broadleaves are frequently banded as the best tool for the job when it comes to carbon sequestration, but landowners should also consider other options such as the attractive financial returns offered from productive conifers on a much shorter rotation.

Inspect to protect

Falling trees and branches caused five per cent of fatal injuries in forestry in the year to March 20212. It is a legal requirement that forest landowners take all reasonable steps to have defective and potentially dangerous trees made safe.

Although the inspection of every tree in a forest is an unrealistic expectation, owners will usually notice physical defects in particular trees. Where this occurs, the services of a professional, who can conduct a detailed inspection and make recommendations, should be sought. Following a storm, checks should be made on trees that may appear physically sound but that, due to their location, may have had their roots weakened through being buffeted by heavy winds.

Landowners also have a responsibility to take action to remove dead trees within a reasonable timeframe due to their unpredictability when left standing. The importance of this has been brought into sharp focus following the ash dieback outbreak of recent years. Priority should be given to those in highly trafficked areas, and most won’t have failed to notice the amount of dead Ash on our roadside verges and hedges waiting to be dealt with.

TOP TIPS

PREPARING A WOODLANDS INSURANCE CLAIM

Should the worst happen, and your business is severely impacted, being confronted by a mountain of bureaucracy can only exacerbate the distress. A substantial amount of information is required for insurance claims and having the relevant data prepared in advance can help prevent delays and result in swifter outcomes.

Essentials

• The quantum of the claim • Compartment maps • Maps of the affected areas

Helpful Documents

• An up-to-date forest plan • Drone Footage or Aerial

Photography • Historic felling receipts

Prepare for the worst

The increasing volatility of weather conditions and the subsequent damage wreaked can have a devastating effect and huge financial impact on the forestry industry.

A significant increase in near surface wind speeds across the UK is being predicted for the second half of the century. Temperature rises in the North Atlantic3 is also increasing the likelihood of the country being hit by the tail-end of tropical storms.

What’s more, higher temperatures not only increase the chances of extreme rainfall and flooding, but they also increase the risks of drought. Swathes of forest risk being transformed into tinder, heightening the risk of wildfires.

Extreme weather is not something that can be controlled and, understandably, this can leave many feeling at the mercy of nature at its worst. But what can be controlled are the steps you take to protect yourself. That is why employing appropriate risk management processes and ensuring comprehensive insurance cover is in place should be a priority.

No landowner likes to think that an unforeseen event could decimate their business, but it is sensible to be aware of the possibility and think strategically. As the saying goes, hope for the best but prepare for the worst.

Contact www.lycetts.co.uk

References

1 Forestry Commission, Forest Research statement, 2021 2 HSE report, 2021 3 Met Office report, 2020