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What are the top risks in commercial construction?

QBE North America has released its 2024 Commercial Construction Risk Report - but what were its key findings? In this edition of Insurance Business TV, Ryan Powers, SVP, head of construction, delves into the top risks in commercial construction, the steps that can be taken to mitigate these risks, the surprises from the report, and much more.

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Paul Lucas  00:02:13
Hello, everyone, welcome to Insurance Business TV, and welcome to a very special construction insurance focused edition brought to you by QBE North America. The construction industry, of course plays a massive role in the US economy. But this has been challenged in recent years by a host of risks. QBE North America decided to survey 500 US commercial general contractors and construction managers to uncover the risks that are that are impacting their timelines, budgets and safety. In this edition, we're welcoming Ryan Powers SVP, Head of Construction at QBE North America, who's going to share some of the results with us. Ryan, welcome to Insurance Business TV. 

Ryan  00:02:54
Paul, it's a it's a pleasure to be here. And thank you very much for having me.

Paul Lucas  00:02:58
So Ryan, shed some light for us. What risks are causing commercial general contractors and construction managers the most concern right now?  

Ryan  00:03:06
Yeah, I would say that this is a topic that has constantly evolved over time. And while there's no shortage of risks that risk managers and commercial contractors are faced with, there were five that rose to the top of that list. And I think the key to that is to be constantly addressing and having a dialogue on it. So the top, the big top five in order, we have cyber cost overruns, high interest rates, labor shortage and any potential economic downturn.

Paul Lucas  00:03:39
Well, let's zoom in on those issues. If you don't mind, tell me why you think those have been such a cause for concern.

Ryan  00:03:46
Each one probably has its own unique story. I think when we talk about it as a community, with the industry, there's a lot of folks that will not be surprised by this list. But I do think if we had conducted this survey, maybe 10 years ago, the storyline here is the the meteoric rise of cyber in particular, when construction managers think of cyber from a distance, I think, in the infancy of this industry, the cyber industry. That is I think a lot of folks would have said, well, you know, contractors aren't necessarily protecting consumer financial or health data, so they may not be a particular target of cyber criminals. However, I think the very nature of construction and the beehive of activity that not just job sites, but in particular contractual arrangements, creates this network of vulnerability within the industry that I think now contractors are being more likely to recognize. So to me, the big storyline here is the emergence of cyber in conjunction with the traditional storylines that we've seen, evolving over the past decades, which are still largely focused around employee safety, and also financial concerns to make your business successful.

Paul Lucas  00:05:11
Yeah, cyber, of course, such a big issue for the entire insurance industry, not just related to construction, of course, but tell me a little bit about some of the steps that can be taken to mitigate some of these risks and how brokers in particular can be helping their clients.

Ryan  00:05:27
It's the best question. So I would say, the best defense against cyber is our traditional methods, which is the human firewall - we need folks that are ready to know when something doesn't smell right, to take the extra step to authenticate, whether that's an email, a link or contractual vendor relationship. I think having the awareness of your frontline employees of this vulnerability is the key. And this might be an area where contractors' teams are not necessarily focused on this when they were learning their skills coming up in the industry, it probably wasn't an area of concern. But here we are today, and the industry is under attack from the cyber criminals. And ultimately, these moments are exactly that - they're moments and the attack is won or lost by the awareness of your frontline employee. So concentrating and creating awareness on this, it's something that every industry needs to consider and to prioritize. But I do think in construction, it's just an emerging trend that needs to be focused on from everybody going forward.

Paul Lucas  00:06:39
And I'm imagining that cyber coming out top of the list perhaps wasn't such a big surprise for you. But  was there anything indeed, that did surprise you from from the survey results?

Ryan  00:06:50
Well, I don't know if it's a surprise, but there are a couple of things here, I would say. So I'm always interested in seeing the nuances within sectors of the construction industry whenever we do some of these research efforts. So for me when I saw the trades of electrical, HVAC and heavy construction being particularly impacted by the labor shortage, labor shortage is something that every sector within the industry is battling and has been battling for a well over a decade plus now. But I do get a little bit more interested in understanding how those sectors have a little bit of nuance. I think the electricians and HVAC folks will look at their carpenter friends, and say that there's probably a little bit less of a shortage in that space, but it's still there. So, you know, highlighting the sectors that are particularly impacted by a labor shortage I find to be to be interesting. And then the other, you know, major, I wouldn't say a major surprise, but it is important to discuss.  I think, you know, as a somebody that serves the community, the construction industry, this is important to have the dialogue - it's that risk managers know that there is a gap between their top concerns and their top areas of least preparedness. So the same five that I mentioned earlier, are the same five that they feel least prepared for. So you at least now have a risk management, construction community that knows where their gaps are, and they're looking for partners and resources to collaborate on. So, you know, as a brokerage community, as a carrier community, we have an obligation to educate ourselves so that we can make it easily digestible for our clients to navigate and prioritize that space. They get so much on their plate to navigate that they need to trust the experts in the industry, whether that's their brokers, their underwriters, their risk control partners, financial advisors, legal advisors, everybody kind of has a role to play in this. And if we're experts in our field, we can bring those efforts to mitigate the gaps faster in our insurance, in an efficient manner, so they can focus on their business. I think that's how we can best serve them.

Paul Lucas  00:09:13
Well, you mentioned the brokerage community there and given the survey outcomes do you have any further tips for retail brokers that are operating in the construction space this year?

Ryan  00:09:24
I would say keep the dialogue going. There's a fierce effort to get close to the client and I don't think that should ever stop. Whether you're a carrier or a broker, we've got to keep this dialogue going - share with them what we're seeing, as we have the luxury of living in a risk management world whereas our contractors are focused on their business. So what can we bring to them to highlight what their risks are, have a dialogue over what their mitigation tactics are and then build a plan together to address and mitigate those gaps.

Paul Lucas  00:10:00
Yeah great-  so Brian, huge thanks to you and to QBE North America for your time today.

Ryan  00:10:05
We thank you very much we're very excited to share our findings and hopefully this helps contribute to a safer and higher quality workplace.

Paul Lucas  00:10:14
I'm sure it's given a lot of people food for thought and thanks to everybody of course for watching. We'll see you next time right here on Insurance Business TV.
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