Allianz Insurance and Euler Hermes have issued a joint report, highlighting the need for brokers and clients to keep up to date with the changes in the construction industry.
After a tough recession, the construction sector is showing strong signs of recovery. According to the latest Euler Hermes data, the sector is predicted a growth of 5% in 2015, with projected turnovers reaching £265 billion.
Although growth prospects for the construction industry are positive, Allianz believes that there are emerging and established trends which present challenges for brokers and their clients.The new paper, ‘Construction – Part 1: Market Outlook and Issues’ is the first in a series of two white papers and offers guidance on market conditions and some of the key trends that have implications for risk.These include:
- Icebergs: the multi-storey basement conversions that have become increasingly popular in recent years tend to be technically challenging projects that involve significant structural alterations and excavations. This means the risks are often substantial, for example, being underground means there can be a greater risk of flood water entering the property, causing damage but also potentially resulting in electrical fires or structural damage.
- Increase in timber frame construction: demand for housing is helping to drive an increase in timber frame construction throughout the UK. As timber frame buildings are at their most vulnerable to fire during the construction phase, and particularly before external cladding or internal plaster boarding is put on, firms should ensure they take appropriate steps to reduce the risk.
- Counterfeit cranes: increased activity in the construction market also heightens the risk of counterfeiting as criminals exploit demand for plant. As well as performance and safety issues, acquiring counterfeit equipment can have serious financial implications.
Chris Little, director of Allianz engineering, said, “The construction sector is rapidly changing and it is really important that the insurance industry stays up to speed with this. Providing risk management advice and insurance insight is a key way the insurance industry can support our customers in this sector. By working together, insurers and brokers will enable the construction sector to continue to build on its successes”.
Didier Moizo, construction sector analyst at global credit insurer Euler Hermes, said: “Growth is being nurtured by a number of factors. Interest rates remain low, making financing cheaper, and government led initiatives are supporting potential demand and revenue opportunities. While the outlook is positive major headwinds affecting the industry are unlikely to drop anytime soon. Pressure on cash flow together with increasing labour skills shortages and intensive competition highlight the need for regular dialogue between clients, brokers and underwriters.”
The white paper, ‘Construction – Part 1: Market Outlook and Issues’ is available to download here. The second white paper examining legislation, risk management and insurance, will be published in early 2016. Allianz can support construction firms with a range of insurance solutions and with risk management advice available to clients through their Risk Director website.
Allianz Insurance is one of the largest general insurers in the UK and part of the Allianz SE Group, the largest property and casualty insurer worldwide.
Around 85 million private and corporate customers rely on Allianz's knowledge, global reach, capital strength and solidity to help them make the most of financial opportunities and to avoid and safeguard themselves against risks. In 2014, over 147,000 employees in more than 70 countries achieved total revenues of approximately 122.3bn euros.
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