Construction and the wider built environment currently accounts for around 40% of the world’s global greenhouse emissions – and the risk of further pollution and waste could soar if global construction output grows 42% by 2030, as predicted in a recent report published by Marsh and Guy Carpenter.
Written with Oxford Economics, a global leader in economic forecasting and analysis, the Future of Construction: A Global Forecast for Construction to 2030 report homes in on climate change and the race to net zero as two of the greatest challenges that the construction industry faces. It stresses a need for the industry to dramatically reduce the amount of carbon embedded in new construction and support the growth of a deconstruction industry that reuses huge existing urban stockpiles of construction materials.
Innovation, technology, and digitalization are helping the construction industry to clean up its carbon footprint, according to Richard Gurney (pictured), global head of construction at Marsh Specialty. And the resulting data to come out of digitalized processes is helping to not only transform design and construction, but also the insurance and risk management solutions that support the critical industry.
“One thing you hear a lot of talk around now is the ‘whole life’ approach, which focuses on: What does the life span of a building look like? And, what are we going to do with it afterwards? If we’re going to meet our emissions targets, we’ve got to be much smarter about all of this,” said Gurney. “We can’t just knock buildings down and start again because it’s just not energy efficient. So, we’re going to have to think about how we recycle buildings. And if we’re going to recycle buildings, then we need to think about how we design them in the first place with that recycling in mind.
“The materials go into a building. What do we use those materials for in the next iteration of that building, whatever that might be? And there’s technology that can help with that. Technology is also driving the modelling of embedded carbon in the design of buildings, the different materials, and the different ways of operating. We have a number of clients that are strong advocates for that, and they’re using modelling to drive savings right from the design stage.”
Construction companies are also using smarter building materials – including wood in its different constituent forms – rather than sticking to the traditional cement, steel and limestone. These new materials are important for the industry’s environmental cleansing because they’re more sustainable and support the recycling needed to reduce the carbon footprint. Technology is also being used to help construction companies do more with less, and craft materials that are lightweight but have enhanced durability.
If the global construction industry is going to achieve 42% growth by 2030, as Marsh and Guy Carpenter predict, then there’s really no time for the industry to do a lot of research into climate-friendly innovation, tools, and solutions. They simply have to act, and they require support from the insurance industry in order to do so.
“Construction companies don’t have the luxury of time,” stressed Gurney. “That is one of the challenges. They don’t have a learning period where they can get everything tried and tested. The need is now. So, innovation is really ramping up and being embraced very quickly around the world in so many different ways. And I think, to an extent, they’ve got to learn as they go on, and that will be a challenge that they have to face together with the insurance market when you think about the risks associated with that.”
One good thing, according to Gurney, is that there’ll be more data available than there’s ever been, because of the digitization and the modern methods of construction that are coming in. This is important for both insurers and reinsurers who build their underwriting models around data.
“As an industry, we have to create an environment where there is an incentive to take risk. Then, acknowledging if there is a risk, how do we manage that? How do we share that burden, and with whom? The people that are paying for it, the people that are building it, the people that are insuring it, the people that are designing it - how do we allocate that risk, so we don’t stifle our ability to innovate and embrace new technologies? Because we have to [innovate]; that’s a fact,” Gurney told Insurance Business.
“We need the construction industry and the insurance industry to work very closely together. The insurance industry needs access to the data that the construction industry is producing so that it can understand the risks it’s taking on and price it. That is a very important equation that we need to get right because it will give confidence in the insurance industry that they are making informed decisions about underwriting.”
One of the reasons why Marsh and Guy Carpenter commissioned the ‘Future of Construction’ report with Oxford Economics was to articulate to the insurance industry just how great the opportunity is in the insurance world, Gurney explained.
“When you see the growth opportunity and the size of the premium pool that will come out of 40% growth in construction, then it’s self-evident that it’s an attractive environment,” he said. “We’re coming out of a pretty tough market environment in terms of the availability of capacity. Definitely, we’re looking to stimulate more and more interest, and I’d like to think that people will look at this and go: ‘Actually, yes, this is definitely a line we want to be in because we can see the long-term growth opportunities.’ And actually, they’ll take comfort from the increasing modern methods of construction, the increasing digitization, and the increasing availability of data that will be able to underpin their underwriting in the future.”
