Increase in claims arising from PFI projects

It is expected that there will be a continued increase in claims brought by public sector bodies in order to achieve financial clawbacks from expensive long-term Private Finance Initiative (PFI) contracts. The PFI underpinned over 700 public infrastructure projects over the last 20 years. In recent times, public sector bodies have sought to pursue rising numbers of claims against PFI contractors with a view to addressing public debt. This has sharpened the focus on the quality of the work undertaken. Allegations against contractors in relation to hospital works has become a growing theme. PFI schools have also come under the spotlight with the recent issues in Edinburgh schools highlighting the lack of independent quality control in the PFI contract model.

Competing demands in UK housing policy – costs and building standards

The Government is committed to promoting extensive house-building, although the February White Paper ‘Fixing our broken housing market’ shied away from specific targets. This recommended encouraging the construction of new homes through streamlining a faster build process and opening the housing market to new contractors. The possible consequences of these steps could have had a detrimental effect on housing design and workmanship standards. Moving forward, building standards across the whole industry have fallen into sharp focus. In likelihood the Government will now have to reflect again on how it fixes the short supply in Britain’s homes.

Brexit at the precipice – a brave new world for construction

The skills shortage in construction is acute. The Farmer Review of the UK Construction Labour Model pulled no punches. It described an industry tottering at a precipice and made multiple recommendations to address process and training issues to reduce the industry’s structural vulnerability to skills shortages – but the skills outlook remains bleak. The Royal Institution of Chartered Surveyors considers that the construction industry may lose 8% of its workforce post Brexit.

The construction industry may now have to enter a brave new world, involving pre-manufactured solutions and re-devised contract obligations. Insurers must respond to any transition with broader proposal enquiries, collaborative risk improvement programmes (focusing on training and experience), project risk surveys with realistic subjectivities, backed up with omplementary reasonable policy exclusions.

Innovative underwriting must underpin smart construction

Underwriters must innovate construction covers to adapt to the advent of smart construction techniques, while also monitoring claims data and margins. Smart construction is growing proportionately faster than conventional building. There has been an exponential increase in the use of technology in procurement, development, design and construction management. This will revolutionise the industry, but construction insurers need to be ready to respond. Robotic demolition, artificial intelligence in design, automated construction, wearable technology, Building Information Modelling Level 3 and cybernetic buildings pose real challenges. However, the replacement of human involvement with technology brings a greater ability to plan for, anticipate and react to traditional construction risks.

Key developments