Building more with less: Can re/insurance enable construction transformation?
The construction sector is at its tipping point: Buildings and infrastructure operation and construction alone are responsible for 40% of global CO2 emissions1. But 70% of the infrastructure needed by 2050 is yet to be built2 . How can this be sustainable in the long term and how can those of us in re/insurance help?
A recent event we organised in Paris with over 60 French and Belgian engineering underwriters led me to think about this more. With contributions from external speakers, we talked about the transition necessary and the re/insurance sector's involvement. These are the three areas with the strongest possibility for us to act now.
Transitioning the construction sector into the circular economy
The construction industry is an industry that consumes the most natural resources and generates more than 50% of globalwaste3 . Reusing used building materials and excavation materials will become key in lowering the construction sector's CO2 production and truly moving it into the circular economy. For example, a large infrastructure project like Grand Paris Metro Express generates 45 million tonnes of excavation waste4 . What if we could turn that into sustainable building materials? This is what the start-up Oxara is working on. One of the speakers at our event, Dr Gnanli Landrou, explained how he and his colleagues are developing innovative solutions to turn construction waste into sustainable concrete, without cement or sand. This kind of innovation and reusing old materials (see Madaster initiative) are key to reducing the construction industry's carbon footprint.
Turning the exciting developments in the construction industry into a positive reality for all
The above-mentioned developments pose challenges for the re/insurance industry: How do we assess the durability and solidity of these new materials? Can we offer decennial insurance on reused materials that are already 50 years old? In the same way that the construction sector needs to evolve, Engineering Underwriting will need to invent new ways of looking at construction risks, so we can support the changes in the construction sector. Re/insurance companies need to invest in methods and tools that adequately reflect these new risks in order to drive sustainable insurance. At Swiss Re, we are forming partnerships with universities to assess the durability of new construction technologies. We also regularly communicate with construction companies to understand their latest trends, form our own opinions, and then share them with clients. The latest example is Franco Ciamberlano's view on modern timber construction.
More complex risks call for more specialised underwriting
Another trend is the construction of larger and more complex infrastructure projects in line with the increasing global need for sustainable energy and transport. We have seen massive infrastructure construction projects as well as colossal disasters in the last few years. As we try to reduce the global carbon footprint of the construction sector by enabling innovation, the latest losses are a reminder that specialised re/insurers are in an increasingly challenging situation. Re/insurers that continue to invest in their risk knowledge will be the best placed to drive sustainable re/insurance for future construction risks.
The three points mentioned are certainly not the only ones that we are taking into consideration. But with these points in mind, we continue to innovate and invest in the new engineering and construction underwriting future. One of our solutions, Swiss Re's Project Underwriting Management Application (PUMA), which we presented at the event in Paris, brings our risk knowledge to our clients in order to support engineering underwriters in navigating through our more complex and sustainable future. If you want to continue the discussion with us, please do not hesitate to contact me at any time.
1Shaping the Future of Construction, 2016, World Economic Forum, BCG
2UN Environment,Joyce Msuya - https://www.unenvironment.org/news-and-stories/story/first-ever-cities-summit-calls-integrated-approach-urban-infrastructure
3Oxara, Dr. Gnanli Landrou, Swiss Re Engineering Event Oct 19, Paris