Challenging but always developing

Mark Barrow, National Marketing Manager at Mirabilis expands on the current Construction & Engineering environment and the implications for the insurance industry.

Tony: When we talk about engineering insurance, what do we mean and what is included or excluded?

Mark: We don’t sell insurance, we sell the ability for development, which allows human activity. Those activities being; to learn, to work and to play. We use insurance to be able to achieve this.

As humans, we all want to have houses, roads, shopping centres, hospitals and schools. That is where engineering really comes in. This is what most people understand engineering to be, that we cover the construction works of civil society infrastructure. That includes government infrastructure, corporate infrastructure and private infrastructure, such as; houses, roads, dams, factories, warehouses, hospitals and the likes.

Besides that, what a lot of people don’t see, is the machinery and electronic equipment that is operating in these buildings. Then further afield in the mines, people are digging down into the earth, extracting all the natural ores and processing of those resources. The plant that is used to extract the ores or the natural resources is also covered under engineering insurance.

Tony: The broad spectrum means that there are a lot of risks that influenced this sector. Can you take us through a few of the factors that influence risk in this sector?

Mark: We cover the construction of buildings from the ground right up until a building is completed and the keys can be handed over. As we have so many different scenarios that we insure, we do it on an All Risk basis as opposed to the basis of a defined risk as a standard fire insurance policy does.

The major risks that we cover are fire, natural elements, theft, accidental damages and your liabilities that come along with the construction and plant activities. We learn constantly from our claim’s experiences as to what the extent of our cover really is in an ever-evolving risk landscape as the cover is All Risk with several exclusion and perils that are possible today may not have existed or may not have been so likely a few years ago.

Climate change is having a significant impact on our coastal areas. That is one of the major risks that we are concerned about as we see more housing and related business development happening in our coastal areas. The other is theft elements such as; copper cabling, general theft of working sites, and wear and tear consequential losses on the plant.

As we now also move into an era of renewable energies development without much insurance experience data in South Africa, we will also be faced with many challenges and hard lessons to learn.

Thus, the art of Underwriting evolves with the type of new perils and claims experiences which is a fine balance between risk appetite, tolerance, and policyholder benefits.

Tony: We need growth in the country, and we need growth in the engineering and construction sector to be able to facilitate that. The national development plan is supposed to be a big influencer of growth to help us there. Which network sectors do you think will be the biggest benefactors in this regard, when it comes to engineering and construction?

Mark: That is an interesting one. Government is a big role player in the construction industry in terms of providing national infrastructure that are the arteries of the economy of any country.

Things like roads, harbours, ports and rail networks are key amongst many others. We are hoping for and have received news coming out of the government that they intend to start to roll out the target of the NATIONAL INFRASTRUCTURE PLAN 2050. So, there is going to be upgrading and expansion happening in our Energy, Freight, water and Digital sectors. That will allow South Africa to take advantage of the demand that we now see in our natural resources and also allows our SADC neighbours to participate in the global economy using our infrastructure, our networks and roads and our ports and harbours to do the importing and exporting.

Tony: That brings me to my final question for discussion, where the takkie hits the tar. How positive are you about the sector and the potential for growth for insurance?

Mark: It would be great if the government does come on board and start spending on infrastructure because they can do a massive turnaround in the actual construction industry. But the resilience of the South African private sector is showing. We have come through some very tough years, and we still have a few more tough years ahead, but the private sector is slowly standing up again.

Human activity will always continue. We have seen that in the market. With events like the baby boomer wealthy generation retiring, the mining sector seeing good growth, and the government’s NIP 2050 implementation there is positivity on the horizon.

We have a large previously disadvantaged population sector being educated, who in turn are increasing the skills pool, wanting to move into urban areas where there are job opportunities and good living standards in the cities. This will increase the middle class, which are the driving factor of any consumption-based economy. This leads to all kinds of developments associated to cater for their demands of living.

Thus, although we are having tough times in the construction industry, there will always be something happening, in terms of all these varied factors and demands that are constantly playing out in South Africa, such as the development of solar, wind, gas, and hydrogen.

Many factors are constantly changing in South Africa that will require construction. That is where we come in and we facilitate the means for these constructions to happen. It is all interlinked, and we should not be thinking that we are doing things on our own as we can only thrive as a nation by collaboration.

Collaboration is key, and without collaboration, we will never be able to move beyond who we are.