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2 essential components to optimise insurability for construction projects

2 essential steps to optimise construction insurance with effective risk register reviews.

11/11/2024 · 3 minute read

Is your construction project adequately insured? Discover how to identify and close critical coverage gaps.

While the construction industry continues to see growth across the globe, construction risks are also manifesting more frequently and intensely than ever before. This exposes organisations to more significant vulnerabilities including climate risks and geopolitical tensions, which could lead to higher material costs, supply chain disruptions, and labor shortages.

A thorough risk register review and insurability analysis can mitigate such risks, helping project stakeholders identify and understand insurable and non-insurable exposures and make informed decisions to protect their investments.

These two components are detailed below. 

1. Risk register review

Construction projects are inherently dynamic, with conditions constantly changing. New regulations, unforeseen site challenges, or geopolitical events can all alter risk landscapes.

Against this backdrop, it is recommended that risk registers – comprehensive lists of all potential risks – should be in place and regularly reviewed to ensure that risks are properly prioritised and updated as the project progresses.

2. Insurability analysis

An updated and well-maintained risk register offers crucial information to assess risk exposure, enabling the insurability analysis process which helps project owners and developers determine which risks are fully insurable, partially insurable, or non-insurable. Knowing where insurance is used during construction can effectively mitigate risk, and stakeholders can make informed decisions about where to invest in additional risk controls or insurance policies.

Marsh’s 6-step approach to insurability optimisation

1. Develop Risk Universe

Develop risk universe to understand current and emerging risks that may impact the achievement of the organisation's strategic objectives.

2. Assess Risk Exposure

Perform risk-rating exercise to determine the likelihood and impact of the risk occurring. Prioritisetop risks with highest exposure.

3. Determine Insurability

Assess insurability of organisation'skey risks and categoriseinto (1) insurable, (2) partially insurable and (3) non-insurable risks.

4. Identify Policies

For all insurable and partially insurable risks, identify applicable insurance policies that can be used to reduce risk exposure.

5. Evaluate Risk-Insurance Alignment

Perform qualitative review to determine if existing policies in insurance portfolio will address the risks identified in Steps 1 and 2.

6. Recommend Next Steps

Provide recommendations to enhance organisation's insurance portfolio and coverage, based on priorities determined in Step 2.

The outcome

This six-step process balances the project’s risk profile and insurance portfolio, and maximises the value of risk management activities by reducing exposure to uninsured or underinsured risks. This leads to a clear understanding of where risk controls or additional insurance are required for optimal coverage.

Case study: Risk register review and insurability in action 

A power plant sought to monitor the changing risk profile of this complex landmark project. Through risk engineering site surveys, reviewing the project's risk register and conducting quarterly project meetings, Marsh Construction was able to:

  • Benchmark the project risk register against registers from comparable projects based on Marsh Construction’s large portfolio of clients in the same industry. 
  • Provide commentary on the adequacy of controls, especially for highly ranked risks. 
  • Highlight any inconsistencies in the risk ratings to allow for targeted review by the client.  
  • Highlight options for merging risks with substantial overlaps and document management techniques to consolidate the project risk register, increasing the efficiency of risk management.  
  • Provide policy wording extracts related to the project's top risks and wider risks outside of the risk register to enhance clarity on risk insurability. 

This proactive activity strengthened the project's credibility with stakeholders through a combined risk engineering and strategic risk consultancy approach. It also allowed the client to focus on the identified immediate key risks that can result in delays and financial losses.

Take the next step with Marsh

Proactively managing your risks through insurance for construction sites can safeguard your project’s success. 

Experts at Marsh Construction possess combined experience in risk engineering and strategic resilience, coupled with a deep understanding of insurance in the complex construction landscape.

Our integrated approach helps risk managers and business leaders enhance their company’s existing insurance programs and risk mitigation strategies throughout the project lifecycle.

Make informed decisions and implement effective risk mitigation strategies throughout your project’s lifecycle.

Schedule a non-obligatory chat with a Marsh Construction Specialist today.