Insurance Reinstatement Valuations
The basis of a reinstatement valuation is the calculation of the cost to reconstruct the building and associated external works to replicate what was originally there, but constructed to the current building regulations and fire officer requirements.
We have to account for all works that are the responsibility of the employer to insure. This may not be everything that is visible on site; some of the fitting-out works, for instance, may be the responsibility of the tenant. Alternatively, it may not be immediately apparent how much of the surrounding site works need to be included in the valuation. The specific scope of the valuation should be agreed with the employer at the outset.
Each element of the building is priced by applying an appropriate rate (rebuild rate) to a relevant functional quantity. Any special features or elements of work that might not automatically be assumed to be a part of the base building’s rebuild rates should be separately priced.
The most comprehensive method of calculating a rebuild rate would be to produce a fully quantified estimate. If the time and level of information available make this impossible, the rebuild rates will have to be derived from data obtained from other sources. These may include:
- Other published cost data including pricing books
- Tenders or final accounts for other similar projects; and the original build cost of the building being valued, which may be available if it is a recent completion.
The benefit of using BCIS is that building costs are presented on a consistent basis, clearly setting out the scope and foundation of pricing associated with each analysed building. The original build cost will be accurate for a short time after construction, but changes to rates and regulations will render this less accurate over time. Whatever data is used, adjustment is always likely to be necessary to reflect the particular characteristics of the building being valued.
In calculating an appropriate rate, using data obtained in respect of other similar buildings, consider the details of the respective buildings, including age, type of construction and the specification level. Additionally, the value of ‘one off’ items such as lifts may influence the rebuild rate. This arises particularly in relatively small buildings, where, if a lift is required, the item cost in question may comprise a proportionately larger percentage of the overall rebuild cost, compared to that of a slightly larger building, which may still only require a broadly similar level of lift provision.
The rebuild rate will also be influenced by specification. When preparing a valuation using rates from comparable buildings, it is important to establish the fundamentals of the specification including:
- Whether the frame comprised steel or concrete construction
- The quality of the external cladding; and the level of fit-out in terms of quality of finish but also to what degree the building may be air conditioned, etc.
All rates, however sourced, should therefore be used with caution. Take care to ensure that all necessary adjustments are made to fully reflect the specific characteristics of the building being valued.
Valuations should generally be priced and presented on a ‘day one’ basis, i.e. the first day of insurance cover. This date should be advised by the employer. Insurers usually add their own allowance to cover increased costs during the periods of insurance, design and tendering, and the rebuilding works.
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