The construction sector is undergoing significant changes, and with it, the landscape of construction risk is evolving rapidly. David Bowcott (pictured), executive vice president of Platform Insurance, described how various factors—economic shifts, project complexity, and sustainability initiatives—are driving these changes and how Platform Insurance is adapting to meet the new challenges.
“Residential is in a bit of a slowdown because of interest rates,” he told IB. “Commercial real estate isn’t as hot with more people working from home, but renewables are booming.”
Onshore manufacturing is also seeing a resurgence as companies seek to secure their supply chains by bringing production closer to home.
“You see everything from battery plants, chip plants, data centres being done in that sector,” he said.
Despite these developments, certain challenges persist, particularly around infrastructure, where Bowcott noted some slowdown. However, he remained optimistic about construction as a whole, pointing out that there’s always activity in at least one part of the construction economy, unless economic conditions become extremely difficult. Governments often use infrastructure spending as a way to stimulate the economy during slow periods, which can lead to fluctuations in the construction market.
"We felt we needed to be at a more nimble shop, one that understood industry focus but also would be able to make those investments that we need to make in order to keep up with our clients," he said. The construction industry is facing growing risks as jobs become larger and more complex, with delivery models shifting dramatically. In the past, projects followed a design-bid-build model, where most of the design work was completed before the contractor bid. This allowed for a more accurate assessment of construction costs.
However, the predominance of the design-build model has upended this. In this model, multiple bidders bid on a project without fully developed designs, which increases the likelihood of cost overruns.
“They set their price on a lesser quality design, or maybe a less developed design, which leads to potentially more risk for cost overrun,” Bowcott said. This shift in procurement models has led to more risks for contractors, who are often forced to absorb these overruns, leading to a higher reliance on insurance as a safety net.
As the design-build model has dominated for the past 20 years, project owners are beginning to realize that this approach comes with increased risks. To address these risks, many owners are moving towards procurement models like design-assist, progressive design-build, and integrated project delivery, which involve more upfront planning and early contractor involvement. These models help lock in more accurate pricing and reduce surprises later in the project lifecycle.
Bowcott said that lack of planning remains a major issue in construction, particularly with large, complex projects—often referred to as "mega projects." He cited the work of Bent Flyvbjerg at Oxford University, who has tracked data on 16,000 mega projects, showing a pattern of cost overruns and delays.
“There’s a lot of thinking fast and acting slow, which means not as much upfront planning," Bowcott said. This lack of planning often results in what he describes as panic on the job site, which can lead to a host of claims – property, casualty, and professional liability – all stemming from inadequate design and planning.
And, with projects becoming increasingly complex, the role of insurance is growing. Smaller projects typically carry basic property insurance or a project-specific builders risk policy, but mid-sized and larger projects will often require a broader range of project specific coverages, including wrap-up liability, professional liability, and environmental insurance. Subcontractor default insurance is also increasingly common in building projects, as up to 95% of work can be subcontracted out.
However, as Bowcott pointed out, insurance capacity, especially for professional liability, has become strained.
“We’re seeing jobs that should have $100 million [in coverage] only have $25 million,” he said, which leaves stakeholders exposed and reliant on their own balance sheets.
Sustainability is another factor reshaping the construction industry. Reducing the sector’s carbon footprint has become a priority, with new technologies emerging to tackle the environmental impact of construction. However, scaling these technologies remains a challenge, especially in an industry dominated by cement, which is a significant carbon emitter.
“Concrete alone, everybody knows, is a massive amount of carbon,” Bowcott said. He referenced countries like the Netherlands, where procurement models now consider both the cost of construction and the associated carbon emissions, indicating a shift toward more environmentally responsible practices.
Contractors are increasingly focused on environmental, social, and governance (ESG) policies, aiming to reduce their carbon footprints through more sustainable materials and practices. However, Bowcott cautioned that despite the best intentions, there are few viable replacements for traditional construction materials, much like the challenges faced in transitioning to renewable energy.
