Delays in construction projects: How to mitigate loss

The chain reaction from the supply chain crisis has resulted in persistent delays in construction projects across Asia.

Global trade disruptions amid heightened geopolitical tension have impacted the built environment supply chain and costs, and Asia’s construction sector. Notably, only about 8.5% of large projects finish on time and on budget,¹ with delays in construction projects in the region exacerbated by material supply shortages, payment delays and defaults, as well as labour shortages and mobility issues.

At the same time, attacks on ships in the Red Sea have extended shipping times for construction materials and heavy equipment — such as machine and engine parts — that are vital to project continuity.² Factors such as the inflation, economic downturn, armed conflict, social unrest, government policies, and domestic electoral outcomes can also abruptly change the construction landscape, leading to higher costs, project delays and financial impacts.

Insurance solutions to minimise disputes and losses from construction delays

As each construction project has its own unique set of challenges and considerations, owners and contractors require a bespoke blend of risk management and insurance solutions that include the following:

To indemnify against insurable risks:

Construction/Erection All Risks (CEAR) insurance: Provides comprehensive coverage for risks associated with a construction project, including damage to the works’, materials, and third-party liability. Key considerations include assessing project-specific risks, ensuring adequate coverage limits, and understanding policy exclusions and deductibles to effectively manage potential losses and protect the project's financial interests.
Delay in Start Up (DSU) insurance: Provides coverage to project owners and lenders for financial losses incurred due to delays in project completion beyond the scheduled commencement of commercial operation date. Key considerations when obtaining DSU insurance include accurately assessing the potential financial impact of delays, understanding the coverage period and waiting period, and ensuring that the policy includes appropriate extensions and endorsements to address specific project risks and circumstances.

To protect against non-insurable risks:

Pre-loss Construction Delay Review: Provides insights to control costs, develop contingency plans (e.g. supplier diversification), and optimise project schedules. A robust review can lead to better streamlined processes, increased efficiencies, and improved productivity.
For delay-driven disputes, our claims advocacy team can help negotiate final settlement with insurers.

Learn more about our construction delay solutions here.