Construction is a crucial sector for the global economy, with continuous activities in the field. There will always be a need to renew existing infrastructure and create new ones. However, the production cycle can be highly volatile, often driven by socio-economic factors. Construction companies must have a clear awareness of current and emerging risk issues and be able to respond quickly to changing conditions.

Climate risks, rising construction costs, and supply chain bottlenecks, along with digitalization, environmental, social, and governance (ESG) factors, are some of the current challenges shaping the risk profiles of construction companies. Understanding the impacts of these challenges allows for the design of a well-thought-out risk management framework that balances an organization’s retention, management, and transfer needs.

We will work with you to create construction risk and insurance strategies tailored to the pressures you face. We can help you design and implement programs aligned with your strategic goals, optimize your capital, and protect your business both now and in the future.

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Frequently Asked Questions

Risks in the construction industry typically fall into the following categories:

  • Physical damage: Severe weather conditions, fires, explosions, vandalism, and theft.
  • Third-party risks: Injuries 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: Expired permits, missing documents submitted to or improperly recorded with local authorities.
  • Project management and organizational issues: Inexperienced workforce, supply chain problems, safety hazards, scheduling conflicts, delays, cost overruns.
  • Contractual obligations: Failure to meet expected quality levels, use of inappropriate materials.

The identification, allocation, and management of risk should begin during the initial project creation phase, alongside an analysis of the competitive factors that determine the project’s commercial viability. Typically, risk allocation is made among project stakeholders to determine who is best suited to assume and manage specific risks. The potential magnitude, financial impact, and frequency of losses will play a role in prioritization. These unmanaged risks are incorporated into the final terms of any contract.

To demonstrate a reliable risk identification and management process for the project, a high level of analysis and planning is required within a process where all project stakeholders are aware and actively involved. Procedures, safety protocols, and risk registers are commonly used to determine how risks will be managed and to document them in detail.

Working with NART’s risk management experts can help you find the right insurance and risk mitigation strategies to protect your project from risk.

Even if you have comprehensive policies for various property and liability matters, these principles do not apply to ongoing construction projects, regardless of the design and/or construction phase. Whether as an individual investor or on behalf of your organization, you will need at least some level of construction insurance coverage (also known as builder’s risk insurance) to protect your financial interests in a construction project.Even if you have comprehensive policies for various property and liability matters, these principles do not apply to ongoing construction projects, regardless of the design and/or construction phase. Whether as an individual investor or on behalf of your organization, you will need at least some level of construction insurance coverage (also known as builder’s risk insurance) to protect your financial interests in a construction project.

Insurance protection is necessary for injury and physical damage risks, and this is often a requirement of the basic construction contract.

Beyond these risks, financial stakeholders may need protection against financial loss if compensable loss events lead to significant delays in the project. This coverage is designed to protect against the loss of expected revenues from projects delayed before becoming operational or to reduce the cost of servicing debts that were built to be serviced with operating income.

Various other insurance coverages can also provide protection against risks related to transit, pollution, design, and other specified project activities.