Construction

The construction industry is characterised by multiple risk variables that impact on safety, timing, completion, and profitability. Marsh’s globally-aligned team of construction industry specialists can work with you to create tailored risk and insurance solutions.

Construction is an essential industry for the global economy and activity in the sector is constant. There will always be a need for the renewal of existing and the creation of new infrastructure. But as the build cycle is often driven by socio-economic factors, it can be quite volatile. Construction companies need to have an acute awareness of current and emerging risk issues and be able to respond quickly to changing circumstances.

Digitalisation, environmental, social, and governance (ESG) factors including climate risks, rising construction costs, and supply chain chokepoints are some of the current challenges shaping construction companies’ risk profiles. Understanding their impact allows for the design of a considered risk management framework that balances an organisation’s retention, management, and transfer needs.

Marsh's globally-integrated team of more than 1,200 construction industry specialists helps clients deliver construction projects in all regions of the world. For more than 30 years, we have supported businesses by accurately assessing their risks, minimising uncertainty, and embracing safety as a business enabler.

We will work alongside you to craft construction risk and insurance strategies unique to the pressures you face. We can help you design and implement programmes that align to your strategic objectives, optimise your capital, and protect your business now and into the future.

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FAQ's

Construction industry risks generally fall into the following categories:

Physical damage: extreme weather events, fire, explosions, vandalism, and theft.
Third party risks: injury and third party property damage, environmental impact.
Design: errors, delays, sudden change requests from stakeholders.
External factors: regulations, tax laws, macroeconomic variables, negative public opinion.
Compliance: lapsed permits, improperly filed or incomplete documents sent to local authorities.
Project management and organisational matters: workforce inexperience, supply chain problems, safety hazards, scheduling conflicts, delays, cost overruns.
Contractual obligations: failure to reach expected quality level, use of improper materials.

The identification, allocation, and management of risk should start from initial project conception with an analysis of the competing factors that determine the commercial viability of the project. Typically, risk allocation takes place between the project stakeholders based on who is best placed to bear and manage a particular risk. Potential size, financial impact, and frequency of losses will play a part in prioritisation. Those risks that cannot be managed will be factored into the final terms of any contract.

Demonstrating robust project risk identification and management requires a high degree of analysis and planning with all project stakeholders aware and engaged in the process. Clearly documented procedures, safety protocols, and risk registers are typically used to capture and detail how the risk will be managed.

Working with Marsh's risk management specialists can help you find the right insurance and risk mitigation protective methods for your project risk.

Although you may already have comprehensive policies for your various property and liability concerns, typically these do not apply in the case of pending construction projects, no matter the design and/or construction stage. Whatever your financial interest is in a construction project, whether as an individual investor or on behalf of your organisation, you will need at least some level of construction insurance (also known as builder's risk insurance) coverage.

Beyond these risks, financial stakeholders may require financial loss protection in the event that indemnifiable loss events give rise to extensive project delays. This coverage is designed to protect against the loss of anticipated revenues from projects that are delayed from moving into an operational phase, or the costs of servicing debt taken out against the construction, which would otherwise be serviced by operating revenues.

A range of other insurance coverages may also provide protection from risks associated with transit, pollution, design, and a host of other identified project activities.

“Marsh Pty Ltd (ABN 86 004 651 512, AFSL 238983) (“Marsh”) arrange this insurance and is not the insurer. The Discretionary Trust Arrangement is issued by the Trustee, JLT Group Services Pty Ltd (ABN 26 004 485 214, AFSL 417964) (“JGS”). JGS is part of the Marsh group of companies. Any advice in relation to the Discretionary Trust Arrangement is provided by JLT Risk Solutions Pty Ltd (ABN 69 009 098 864, AFSL 226827) which is a related entity of Marsh. The cover provided by the Discretionary Trust Arrangement is subject to the Trustee’s discretion and/or the relevant policy terms, conditions and exclusions. This website contains general information, does not take into account your individual objectives, financial situation or needs and may not suit your personal circumstances. For full details of the terms, conditions and limitations of the covers and before making any decision about whether to acquire a product, refer to the specific policy wordings and/or Product Disclosure Statements available from JLT Risk Solutions on request. Full information can be found in the JLT Risk Solutions Financial Services Guide.”

Construction