Business interruptions and natural disasters, main risks in construction

Allianz Global Corporate & Specialty (AGCS) launched the Global Enterprise Risk Survey last January, as part of the Allianz Risk Barometer 2023. It is today releasing its Global Industry Solutions Construction Outlook, which focuses on risk trends in construction. Its other sector reports concern technology, media and telecommunications, and financial services.

Blanca Berruguete, Global Director of Construction Industry Solutions at AGCS, said: “Values ​​at risk have increased. Construction costs are soaring in the face of rising energy and raw material prices. Replacements are more expensive and take longer. Materials may also be unavailable due to logistics, transportation and supply chain issues. Property damage and business interruptions are therefore likely to be significantly more costly than before the Covid crisis. »

According to Blanca Berruguete, "the construction sector is facing many challenges: prospects of recession, shortage and increase in the cost of energy, equipment and materials due to high inflation, rising purchasing costs, shortage skilled labor, longer schedules and delivery times, cost overruns, disruptions to supply chains, ever-changing occupational health measures and increased competition. »

The energy crisis, together with other factors, has contributed to rising costs in construction, an energy-intensive economic activity. In the medium and long term, it could nevertheless serve as a catalyst, by accelerating the ecological transition of this sector, which is a major emitter of greenhouse gases, thanks to the adoption of more sustainable approaches.

The move towards carbon neutrality will support sustained growth in construction in the future. However, new technologies, innovative delivery methods and greener, leaner practices will not only bring benefits. They will also create new risk scenarios, including potential faults and repeat losses, and even unintended safety and environmental consequences.

“The transition to sustainable energy and the adoption of modern construction methods will transform the risk landscape, with radical changes in design, materials and construction processes, explains Blanca Berruguete. To achieve decarbonization goals, rapid change is likely to be needed. It will require close cooperation between insurers, brokers and customers to share data and experiences to underwrite risks that could be unprecedented”.

Fires and natural disasters, the main causes of loss

Regarding actual claims, fires and natural disasters are the main causes of claims in construction and civil engineering, according to the analysis carried out by AGCS of 22.000 claims amounting to 12,8 billion euros. euros over five years, from 2017 to the end of 2021. Fires are the most expensive cause of loss, with 27% of the amount of losses analyzed. Natural disasters account for almost a fifth of claims by amount (19%) and are also the most frequent cause of claims.

Risk assessment on construction sites must take greater account of the impact of extreme events, such as forest fires, flash floods and landslides. Climate change is increasing the frequency and severity of these events. The costs of property damage and business interruption could therefore increase rapidly.