Cyclones Veronica and Trevor delivered an unmistakable warning about the impact of extreme weather events as they moved inland, bucketing torrential rain. Construction sites in affected areas were inundated, and it looks like there will be more where that came from.
According to the 2019 Global Risks Report which canvasses nearly 1000 international decision-makers from multiple sectors, extreme weather is seen as the number one risk in terms of likelihood and the third in impact (after weapons of mass destruction and the failure of climate change mitigation and adaptation).
Undeniably wild weather is an increasing occurrence in Australia, with building contractors exposed to damage and delays from rain, storms, flooding and bushfires more frequently than they have been before but, according to an industry-compiled report, only 56% of 2017 disaster losses in Australia were covered by insurance.
“When construction firms become unable to predict weather patterns and develop emergency plans for weather variables, it puts their entire business at risk,” warns a report by CMiC Evolve, Extreme Weather and the Construction Industry.
The impact of extreme weather on project profitability includes
Gallagher’s Practice Leader, Construction, Angela Vella advises businesses to review their insurance protection against the impact of weather events, bearing in mind they could be insured under a principal’s policy – which may not provide the cover expected or that contractors can obtain under their own policies.
“More and more frequently we see that principal-controlled insurance policies traditionally available in the insurance market don’t provide cover for certain types of weather events, and they also impose very high deductibles for contractors,” she says.
On the positive side, construction insurance against these extreme weather events is evolving, with products that don’t require physical loss or damage to activate the policy, instead predetermining a ‘trigger event’ based on weather risk – such as extreme temperature, rainfall or wind – and tailoring the insurance payout to reflect the contractor’s financial exposure to the event, which might include liquidated damages, prolongation costs or other losses.
“Gallagher has been working with clients to develop innovative solutions to deal with the changing exposure to weather events, by tailoring contract works insurance to not only cover reinstatement of loss or damage, but to work towards reducing the uninsured risk associated with prolongation costs. Our market-leading solutions aim to improve cash flow for clients to help them survive insurable events,” Vella says.
Want to know more about extreme weather risks and how to prepare for them? Read Gallagher’s in-depth white paper, ‘Weather forecast: predictably unpredictable’.
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Gallagher’s construction specialist brokers have the expertise and industry knowledge to formulate insurance solutions that meet the challenges contractors face with managing their exposure to extreme weather. Talk to a specialist in your area now.