Single Projects

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 organizational 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.

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, as an individual investor or on behalf of your organization, you will need at least some level of construction insurance (also known as builder's risk insurance) coverage.

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 prioritization. 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.

Insurance protection is required for injury and physical damage risks and will ordinarily be a requirement of the underlying construction contract.

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 net income 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.