For the construction industry, risk is a big part of the success equation. Mitigating risk can lead to greater success for the business, and ultimately to more sustainable, resilient homes, buildings, and infrastructure. Understanding and identifying risk, then, becomes a critical step in ensuring success for a project.
Let’s consider just one example. $368 billion. This is the economic losses resulting just from global natural disasters in 2024. $368 billion. This number is so crazy high to me. Now, imagine if there was a way to mitigate some of that risk. A new report from Aon, the 2025 Global Construction Insurance and Surety Market Report, gives an in-depth look at the risks construction professionals are facing today and strategies to mitigate that risk.
What Are the Risks?
First, let’s examine some of the key risks facing the construction industry. One of the biggest is the one we have already discussed: natural disasters. Tropical cyclones, hurricanes, wildfires, tornadoes: all of these are picking up with rapid speed and are creating more damage.
Second, another challenge is economic and geopolitical uncertainty. Inflation has been rising in many parts of the world. This instability has also decreased supply chain resilience, which can increase project delays and cost increases. Talk about risk!
Third, add to all of this increasing cyber risks, something we have covered in-depth on the blog here. Our data is key to driving transformation, but it is also at risk, something all construction companies need to be aware of.
These are three of the big trends mentioned in the report—but there are others to report as well. For instance, the Aon report suggests there is a two-tiered market that is emerging for some products and in some regions, based on risk classes.
While this varies by product and location, many markets have softened, which means clients with relatively low-risk projects or good track records are experiencing favorable outcomes. Conversely, challenged risk classes are experiencing greater-than-average rate increases and might have difficulty acquiring coverage. This includes projects related to heavy civil contracting, those exposed to significant natural catastrophe risks, and those that have had previous losses.
What Are the Strategies?
Naturally, good insurance coverage will be key to mitigating this risk, and thus project teams should start the process of researching insurance early, especially for complex projects. The report also points to a few other key strategies including evaluating contract structure with a focus on required insurance and risk assumptions, implementing risk control and mitigation measures and documenting clearly, and considering the use of alternative risk transfer tools to address risk exposure, just to name a few.
I would add to this list that we must also consider technology. Construction technology can help us mitigate risk in so many unique ways.
Companies can better assess and predict risks with good forecasting models. AI (artificial intelligence) can predict incidents or weather events before they occur. Construction companies can then leverage this data to make informed decisions. And, of course, this is only one example. As I always say, the opportunities are limitless, with the help of technology.
As risk grows in construction, are you open and willing to embrace new technologies to help mitigate the risk that is costing billions?
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