Smarter Way to Risk: Managing unprecedented growth and risks in global construction

Opportunities abound as the global construction market becomes greener, but so do new perils, according to WTW’s global head of construction Bill Creedon, with effective risk management key for the industry to thrive.

This is the central message of the first episode of a Smarter Way to Risk, an informative new series brought to you by WTW in partnership with The Insurer TV.

The series combines industry-specific knowledge and a global perspective to offer data-enriched insights, facilitating informed risk decision-making and optimisation of outcomes.

In 2022, the US construction sector accounted for roughly 4.3 percent of US GDP with a market size of about $1.6trn.

Similarly, the UK’s construction output now contributes 7 percent of GDP, having surpassed £110bn, while construction in most European countries comprises between 4 percent and 7 percent of their GDP.

The global construction sector is not only thriving, but is set for unprecedented growth in the years to come, thanks to opportunities presented by the global green economy.

However, this growth is bringing with it more risk, and in some cases, new risks.

A key challenge is labour, with construction projects growing so large and complex that a typical $10bn-$20bn project may require over 10,000 workers a year into its lifecycle.

With global construction work projected to grow by over $4.2trn over the next 15 years, labour issues may be further exacerbated.

However, technology, specifically AI, is emerging as a potential solution. A recent survey revealed that 92 percent of construction companies are likely to soon adopt some kind of AI. This technological innovation brings its own challenges though, such as increased exposure to cyber risks.

Rising claim costs due to inflation and supply chain issues are also impacting the industry.

The inflationary pressure is driving up material costs and extending project timelines, leading to insurance underwriters having to revisit project risk assessments.

Additionally, an unexpected headwind for the industry is the phenomenon of nuclear verdicts. These unexpectedly high jury awards have contributed to rising premiums in the construction sector. A recent example is the $860mn claim that resulted from a crane tipping over in a windstorm in Texas.

Despite these challenges, there's a silver lining in the form of a more specialised approach to insurance. WTW, leveraging advanced analytics, is creating bespoke risk profiles for its clients, putting downward pressure on premiums. This specialised and data-informed decision-making approach is what industry professionals describe as “the smarter way to risk”.

WTW's Smarter Way to Risk emphasises that risk management is crucial to thrive in an uncertain world. By combining specialised industry knowledge, excellent client service and a broader perspective, WTW aims to optimise risk outcomes for its clients in the global construction industry.

Watch this six-minute Connecting Risk Globally episode to learn more about: