Allianz Global Corporate & Specialty (AGCS) has outlined new trends in construction risks as the global industry poises ready for a boom in growth, driven by an expected surge in government spending on infrastructure and the switch to net zero carbon emissions.

AGCS cites estimates the global construction industry will grow 42% to $US15 trillion ($21.42 trillion) by 2030, outperforming manufacturing and services. Australia, Germany and the UK will each make up 3% to both be in the top 10 country markets. China will make up 24% and the US 14%.

“This boom in global construction will, however, present challenges for the construction and engineering sector, and their insurers,” AGCS said.

“Huge investments in green energy will mean larger values at risk, while the rapid adoption of unproven technology, building methods and materials will require close co-operation between underwriting, claims and risk engineering, as well between insurers and their clients.”

Pursuing net zero would create a market for wind turbines, solar panels, lithium-ion batteries, electrolysers and fuel cells of well over $US1 trillion a year by 2050, the “managing the new age of construction” risk report says.

“This switch to sustainable energy and the adoption of modern building methods will transform the risk landscape, with radical changes in design, materials and construction processes,” it said, adding that a shift to electric transport will also require investment in new plants and battery manufacturing facilities, as well as charging infrastructure and power generation.

Commercial buildings and plants may also need upgrading to protect assets from storms and floods, while ageing infrastructure will need to be upgraded to cope with more extreme weather events.

The pandemic exposed shortcomings in health and social care which could translate to increased spending on hospitals, construction of manufacturing plants and warehouses closer to home may be undertaken to strengthen supply chains, and telecommunications infrastructure, data centres, logistics and e-retailing hubs may be built.

AGCS says construction insurers will need to overcome underwriting challenges such as extended project durations, natural catastrophe exposures and delay in start-up covers that are likely to restrict available capacity. The market will also face new challenges of supply chain volatility and spiking material costs and risks of skilled workforce shortages for contractors.

Following are the ten trends identified by AGCS:

1. A new age of risk
2. Infrastructure projects – a key element of the post-Covid-19 economic recovery strategy
3. Sustainability will drive changes in risk profile
4. Upscaling clean energy brings challenging risks
5. Hydrogen may emerge as a new energy sector but brings risks
6. Modular construction is growing, but with enhanced exposures
7. Pandemic increases claims costs and causes materials and labour issues, but remote inspections are a success story
8. Time to build in extreme weather risks
9. Water damage a major cause of loss, especially at weekends and out of hours
10. Digitalisation of construction creates cyber exposures

See the full report here.