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The impact of natural catastrophe risks on construction projects

January 12, 2024

Natural Catastrophe risk management and resilience is a high priority for the construction industry due to the devastating impacts such events can have on construction projects.
Climate|Environmental Risks|Corporate Risk Tools and Technology|natural-catastrophe

The startling frequency of catastrophic events such as earthquakes, wildfires, hurricanes and typhoons is concerning for everyone. Natural catastrophes are impacting individuals, communities and companies alike. The risks of devastating property damage, injuries to people in effected areas and the loss of life are just some of the consequences of these events. Along with these, the construction industry must face other impacts such as project delays, supply chain issues and construction damages.

From an insurance marketplace perspective, when it comes to construction projects, we have observed improved pricing conditions, coverage, and capacity for most commercial lines of business with the exceptions for Natural Catastrophe (Nat-Cat) exposed projects and renewable programs with poor claims experience, lack of robust risk management plans and prescriptive formal loss mitigation protocols. These projects still experience rate increases in the double digits and sometimes, more importantly, see capacity becoming less available. Undoubtedly, natural disasters have a significant impact on the construction industry. To effectively navigate the complex challenges driven by unpredictable weather conditions and climate changes, organizations should consider adequate insurance coverage and proactive risk management strategies to help prepare for the future.

Data-driven and analytical solutions can help construction organizations with their risk assessment processes and management strategies. Leveraging advanced data analytics and risk-modeling tools can provide construction companies with insights of the high-risk areas, so they can make informed decisions. It’s also important to ensure companies are using weather-proof materials, following building regulation codes and best practices that contribute to the safety on construction sites.

Although climate change is often considered to be the main cause for any natural disasters, it is critical not to forget the role socio-economic factors play in determining the severity of extreme weather conditions. After all, natural hazards become catastrophes only when they are met with an inadequately prepared society. In order to improve weather resilience in the construction industry, organizations should also look at how interactions between hazards and society are changing.

What can you do to prepare adequately?

  1. 01

    Strategic risk consultancy and analytics

    • Partner with a natural catastrophe risk consultancy service that can offer you in-depth risk analysis, hazard and catastrophe modelling, vulnerability assessments and catastrophe engineering loss assessments to help you understand and quantify the hazards you face.
  2. 02

    Model evaluation

    • With the right level of research, you can evaluate natural catastrophe models to help you better understand the strengths and limitations of the hazards, vulnerability, exposures and potential financial losses.
  3. 03

    Science-based partnerships

    • Partnering with organizations that apply scientific thinking to understanding natural catastrophe risk management, risk modeling and resilience planning.
  4. 04

    Data quality

    • Utilizing data cleansing services that can help enhance geolocation data and building characteristic codes, and clarify how values are apportioned between buildings, contents and business interruption.

Organizations should focus their Nat-Cat exposure risk management strategies on both short- and long-term value creation, viability, stability and growth.


Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).

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