Author: Chris Boggs

Review underwriting data provided by most insurance carriers and you generally find a four-digit code called the RCP code. Valuable information is contained in and provided by this code, if you know how to interpret it.

Before describing each part of the RCP code, let's define RCP. Simply:

• R = Rating
• C = Construction
• P = Protection

Even if you already know how to interpret RCP Codes, read this article anyway; you might pick up some information you didn't already know. If you don't know how to interpret the RCP, you will in about 7 minutes. 

Rating (RCP)

“Rating” for our purposes refers to the status ascribed to the building as either sprinklered or nonsprinklered. If the first number is “4,” the building is receiving sprinkler credit. If there is a “1,” the building is assigned a nonsprinkler rating. The only options we are discussing are “4” and “1.” There are two other options: “2” is class rated and “3” is sub-standard conditions in class-rated risk.

Don't misunderstand, the presence of a sprinkler system does not guarantee a "4" is assigned. A "4" is assigned only when the building meets certain requirements and is graded and rated by Insurance Services Office (ISO) as a sprinklered building.

If the insured's building is protected by a sprinkler system but the "Rating" category is a "1," this indicates the sprinkler system is somehow lacking and is not receiving sprinkler credit. If this is the case, the agent should ask why the system is not getting credit for the sprinkler system.

Possible reasons the sprinkler system may not garner the necessary credit include, but are not limited to:

• Inadequate water supply;
• The system is inadequate for the exposure (was a warehouse now a woodworker);
• Too much unprotected area;
• Not well maintained;
  
• Improperly installed;
• Obstructions and/or high-rack storage problems; and/or
• Invalid, improper, or the lack of necessary tests.

With this information, the agent is better able to advise the building owner what steps must be taken to garner a sprinkler rating. Some deficiencies may be correctable, but some may be beyond the building owner's control (such as the public water supply). 

Construction (RCP)

"Construction" refers to the construction class assigned to the building and is the second number in the RCP code.

ISO defines and assigns a building's construction class based on the combustibility and damageability of the "major structural features." The major structural features considered are the exterior, load-bearing walls (the primary elements) and floors and roof (secondary elements).   

These primary and secondary elements combine to create the construction class. The lower the number, the more susceptible to fire damage the structure is considered (and the higher the Group I fire rate, relatively). The higher the number, the less susceptible to fire damage the building is considered (and the lower the Group I rate). ISO applies six primary construction classes:

• Construction Class 1 – Frame
  
• Construction Class 2 – Joisted-Masonry
  
• Construction Class 3 – Non-Combustible
  
• Construction Class 4 – Masonry/Non-Combustible
  
• Construction Class 5 – Modified Fire Resistive
  
• Construction Class 6 – Fire Resistive 
  

Four 'rules' aid in the development of the construction class:

1. If the exterior, load-bearing walls are "combustible" (wood or a combustible assemblage), the entire building is rated as construction class "1" regardless of the roof material.
   
2. If rule "1" does not apply and if the exterior, load-bearing wall is non-combustible or "slow burning," the structure's construction class is based on the roof and floor construction materials – but in no case can the construction class be better than the classification assigned to the walls.
   
3. If the load-bearing walls are masonry, fire resistive, or modified fire resistive, the construction becomes a function of the floor/roof materials.
   
4. "Major structural features" are often an assembly of several parts. If the walls are anything other than masonry, modified, or fire resistive material, the entire assemblage is classed using the most combustible or susceptible member of the assemblage. Example: An all metal exterior building on metal studs with the interior studs and insulation covered with plywood. The plywood makes this a combustible assembly
   

Assigning the construction class is more difficult when the is mixed construction. The use of different building materials can result in the building being eligible for more than one construction class. When more than one construction classification is assignable to a building, the entire building is assigned the LOWER construction class unless 66 2/3 percent or more of the building is comprised of the superior construction class. When more than 66 2/3 percent of the building is of the superior construction class, the entire building is assigned the higher (superior) Construction Class Code.

Protection (RCP)

"Protection" is short for the public protection class (PPC). The RCP's third and fourth numbers indicate the PPC assigned to the fire district in which the subject building is located. Unlike the first two numbers, the lower these numbers, the better.

Fire departments are inspected by ISO (or some other jurisdictional authority) and assigned a PPC between 1 and 10 based on several factors such as department response times, water supply, personnel training, equipment, communications, and personnel (paid versus volunteer). The lower the number, the better.

Within the RCP, a PPC 2 district is shown as "02;" a PPC 10 district shows up as "10."

Sample RCP Codes

Let's analyze a couple example RCP Codes before closing. These should be easy now:

• RCP Code 1304
• Rated as nonsprinklered (either no sprinkler system or one not receiving credit)
• Construction Class 3
• Protection Class 4

• RCP Code 4404
• Rated as sprinklered
• Construction Class 4
• Protection Class 4

Now the RCP Code holds no mystery for you.

Although the RCP Code provides a great deal of information, the data contained within the code is only a very small part of all the information necessary to underwrite a commercial property policy. On February 15, 2017, the VU hosted a webinar that went into far more detail on these and all factors relevant to commercial property underwriting, Understanding Commercial Property Underwriting - COPE in All its Glory. This webinar is now available as an on demand recording and as a PDF transcript. It is recommended viewing if you have any commercial property clients.

And here are a couple more articles about this topic:

• Three Ways Your Clients Increase Their Own Property Premiums
  
• The Unseen "Magic" Behind Commercial Property Underwriting
  

Last Updated: March 16, 2017
First Published: February 3, 2017