For the first time, construction in emerging markets is now outpacing developed markets, according to new research by AIG, a construction insurance provider.
Daniel Abramson, AIG’s Global Head of Construction, said this shift is in significant part being driven out of Asia where population growth and urbanisation is creating the need for more construction investment.
“Last year 52 percent of the world’s construction came from emerging markets. By 2025 we expect this figure to grow to more than 60 percent with big infrastructure projects in China and India set to lead the way,” Abramson says.
Abramson notes Singapore has a key role to play in enabling this growth.
When it comes to insuring construction risk Singapore is now Asia’s insurance hub, with Singapore-based companies projected to underwrite US$4.5 billion worth of construction projects this year, a 22 percent increase over the past five years, and set to rise to US$6.5 billion by 2018.
Rudi Spaan, AIG’s Head of Broker & Client Management, says what is being seen in Singapore not only indicates the increasing number of projects being undertaken across Asia, but also the multiple risks involved in these projects.
“Today projects involve a global supply chain, where materials and equipment are sourced all over the world and this inherently increases the risk," Spaan says.
"When the complexity of multiple jurisdictions is introduced, different legal exposure, contractual obligations, tax and compliance issues, and cultural norms such as work safety have to be taken into consideration.”
Companies therefore need to look for tailored solutions to ensure they implement world-class risk management strategies that are tailored specifically to their project because in today’s environment there is no one-size-fits-all strategy, he says.