By Jim Connolly, Head of Construction and Engineering at Infiniti Insurance Limited
The future of construction insurance globally is being significantly influenced by weather-related risks, necessitating a shift away from conventional building practices to meet and adapt to the evolving weather conditions so as to continue to meet market demands. The rising frequency and severity of extreme weather events globally have exposed construction projects to unprecedented weather-related risks, leading to a substantial increase in insurance claims.
These risks disrupt the entire supply chain often resulting in interruptions, delays, or work damage. Therefore, project owners, contractors and developers incur significant financial losses, resulting from additional expenses of mitigating risks. We are beginning to see increases in premiums and exclusions in regions highly exposed to weather-related risks. For example, natural-catastrophe-related coverage exclusions were applied in some locations in the KwaZulu-Natal province following the persistent widespread floodings.
Insurers and reinsurers are already grappling with changing risk profiles influenced by extreme weather events. In 2023, only 43% of global weather-related losses were insured, resulting in a $132 billion protection gap, according to the Building a Climate Resilient Future report launched at COP28. As clients become more aware of the need to insure against weather related loses, insurers must build resilience to increase their capacity to handle an increase in the number of losses covered when a natural disaster occurs.
The United Nations Economic Commission for Africa’s African Climate Policy Centre estimates that the loss and damage costs in Africa due to climate change are projected to be between US$ 290 billion and US$ 440 billion, depending on the degree of climate warming.
Focusing on risk management and mitigation
As construction projects become more intense in scale and geography, and the number of climate-related disasters increases, there is a need for more understanding of climate risk and how it can be managed. Underwriters must examine the potential impact of climate change on the validity of their risk assessment and risk modelling tools.
Successful Partnerships
As the insurance landscape constantly changes, at Infiniti Insurance we remain committed to supporting you to adapt to the changes and meet the insurance needs of our mutual clients.
We are here to help you succeed.
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To manage risks of the extreme weather events, insurers need accurate weather insights and granular information such as geo-co-ordinates. These insights will help underwriters understand the weather risks associated with countries, regions and properties of interest. By providing this information, insurers can help property owners and developers understand the threats their properties face and how to mitigate them.
Project managers and developers should also seek the advice of an insurance broker who has experience in construction and expertise around the physical risk associated with natural catastrophes. During the design process, the project manager must undertake a detailed climate risk assessment of a site and implement appropriate resilience measures to mitigate the risk of natural catastrophes. Climate mitigation and adaptation should be an integral component of the design process in all construction and building projects. Understanding the risk of climate change and adverse weather conditions is essential to developing effective risk management strategies.
Tailored insurance solution
Under these circumstances, insurance becomes critical to protect the industry against these fast-emerging risks. Contractors need to understand the risks involved in their projects and to put the necessary measures in place to mitigate any potential liability that may be incurred.
At Infiniti Engineering our policy covers the risks during contract implementation and execution during rollout and installation as well as risks affecting machinery and equipment. The policy also provides cover for the employer’s property in the care, custody and control of the contractor up to a limit agreed upon and stated in the policy as well as cover for liability that might accrue to the contractor directly as a result of the building activities subject clearly to the terms and conditions of the policy contract.
Through our Guarantee Division we are also able to provide our clients with a Construction Guarantee should they require one. We believe that a strong partnership between our trusted brokers and our focused Engineering underwriters, specialising in project and engineering insurance, is fundamental to the success of construction projects undertaken by our mutual clients.