As construction faces unprecedented challenges - from Brexit fallout to a surge in cyberattacks - brokers are having to evolve to help clients navigate a shifting risk landscape.
“Supply chain disruptions, labour shortages, regulatory changes post-Brexit and increased material costs are a huge problem,” said Andrew Ferguson, managing director at Gallagher’s Bristol branch.
Cyber risk is also growing rapidly. Ferguson noted: “We’re seeing losses related to digital technologies.” Cyber Management Alliance expanded on this, stating: “The construction sector is increasingly being targeted by cyber criminals due to the large sums of money involved in projects, the extensive use of subcontractors, and the relatively low level of cyber maturity compared to other sectors.”
As a result, Ferguson stressed the need for brokers to stay proactive: “Reinstating a building in 2025 is much different than it was in 2020. So we've got to be talking to our clients about what happens when we don't review someone's insured levels.”
Digital threats aren’t the only concern keeping construction insurers up at night.
Jason Baston, head of construction client development at Miller Insurance, believes insolvency is shaping the sector, and this is “not just before the construction happens, and during the build, but also in the years following completion.”
According to Baston, brokers’ clients need to think long and hard about who they are getting coverage from. “If you choose to arrange the cover via the contractor, and the contractor does become insolvent during the project, then you are putting yourself, as a project employer, at significant risk of having no cover.”
Baston added: “Construction remains the worst affected sector for insolvency…the domino effect for subcontractors is that they may well fail as well, and those subcontractors work for other main contractors who then need to replace them.”
Baston also raised concerns around water-related claims in construction: “Escape of water… that’s burst pipes, sprinkler rises, leaking or even sometimes services installed, such as washrooms or sinks... The damage attributed to water losses is now seen by many insurers to be as big, if not bigger, than fire.” He argued that it should be a key risk focus: “Insurers now are mandating, particularly for larger or more exposed projects, a greater level of risk management and risk mitigation.”
ESG and sustainability issues are also top of mind for construction operations. Ferguson highlighted shifting expectations. “We’re seeing more green building certifications, renewable energy projects, and environmental liability covers - things we probably didn’t see five or 10 years ago,” he said. “Tender processes with carbon footprint requirements are big as well.”
Ultimately, Ferguson believes brokers need to adapt by integrating ESG compliance in tenders and risk strategies, monitoring regulation changes, connecting clients with ESG-focused underwriters, and benchmarking sustainability risks with data. “You’ve got to move with the times, clients in construction have moved on,” he said. “I see us more as risk managers in the future… we’ve got to be going to clients, understanding their business. Form a relationship. Don’t be transactional.”
His words were backed by Baston too, who encouraged brokers to remember that every project is different. “What worked on one project may not be appropriate for the next… so it’s important to have a regular conversation around appropriate cover. It’s only through detailed and expert conversation to understand the threats and the choices available, that they can proceed with comfort that they’re adequately protected.”
