Digital technologies are increasingly influencing the construction industry and thereby reshaping the insurers’ risk landscape. Novel building materials and mega projects are also influencing construction industry practices. It remains to be seen how an industry normally slow in adopting such technological changes will embrace these new challenges.
Construction processes, methods and materials are making increasing use of elements of digital technology. Building information management (BIM) is the digitalisation of the construction planning and execution process and promises to simplify coordination between not only design team disciplines, but also between design and construction teams. Other digital and emerging construction technology includes the use of drones or 3D scanners to monitor excavation work, and embedding sensors in building materials to monitor their integrity. As is typical of prototype technology, these innovations can generate as yet unknown risks, while cyber vulnerabilities can lead to data disruption or loss. Major systemic design errors can also result from reliance on technology. It is unclear whether the risks or benefits such as better quality control of these technologies will prevail.
Combustible exterior cladding
Combustible exterior cladding are facade elements that when used on high-rise buildings and accidentally ignited have the potential to generate fires that spread very rapidly. The Grenfell Tower fire in the UK and the Address Hotel fire in Dubai are two recent examples. Although such fires typically affect property lines of business (LoB), they may create a second wave of claims under financial or casualty LoB. Professional indemnity for architects & engineers may be triggered if the facade design fails to prevent the fire from spreading. Contractors can also incur liability for installing cladding that fails to meet regulatory requirements, while coverage for expensive repair work can be sought under warranty covers.
Novel building materials
Innovation combined with the need for energy-efficient buildings has created a wealth of novel building materials. Examples include self-healing concrete, lighter and more efficient insulation and self-cleaning surfaces. In the absence of long-term performance experience with these materials, the potential for defects (eg water leakage) or shorter service life is higher than expected. These issues can generate product liability losses for building material manufacturers and construction defect losses for contractors. These materials may require new installation techniques, thereby creating new challenges for contractors or builders, while some of them may come with the promise of accelerating the construction process – a benefit if this proves to be the case, but a cause of project disruption if not.
Construction projects are becoming ever larger and more complex, with mega projects often having very long project durations, sometimes more than ten years. These long durations make accurate time scheduling very difficult and may be accompanied by changes in construction technologies that are hard to predict and factor into the planning. Virtual teams can span multiple time zones and supply chains can stretch around the world, making communication and coordination among project participants extremely challenging. Regulatory requirements are also forever changing, making it difficult for international construction teams to keep up with local regulations during long projects.