September 22, 2014
Singapore has become Asia’s insurance hub for insuring construction risk , with companies based in the city-state projected to underwrite US$4.5 billion worth of construction projects this year, a 22% increase over the past five years. The figure is set to increase to US$6.5 billion by 2018, participants at a conference last week hosted by AIG were told.
New research by AIG found that for the first time, construction in emerging markets is outpacing that in developed markets.
Mr Daniel Abramson, AIG’s global head of construction, said that this shift is being driven by Asia’s population growth and increasing urbanisation.
“Last year, 52% of the world’s construction was in emerging markets. By 2025, we expect this figure to grow to more than 60%, with big infrastructure projects in China and India set to lead the way,” he said. The insurance sector in Singapore would play a key role in promoting this growth.
Mr Rudi Spaan, AIG’s head of broker and client management, said that what is being seen in Singapore not only indicated 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,” he said. “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 risk management strategies that are tailored specifically to their project because in today’s environment there is no one-size-fits-all strategy, he said.