Extreme Weather, Natural Disasters Top Construction Risks Over Next Five Years -- Zurich

KUALA LUMPUR, June 18 (Bernama) -- Zurich Insurance Group has identified extreme weather and natural disasters as the most severe risks facing the construction sector over the next five years, assigning a score of 6.2 out of seven on its risk severity scale.

In its report 'Beyond 2030: The Future of Construction', Zurich said financial market vulnerabilities and labour market dynamics ranked as the second- and third-largest risks, with scores of 5.7 and 5.6, respectively.

The insurer said climate extremes, labour shortages, rising capital intensity and growing cyber threats are no longer isolated pressures but increasingly interconnected risks across the global construction industry.

Zurich Malaysia chief underwriting officer Anthony Seeto said Malaysia’s construction sector is similarly exposed, with climate-related disruptions, tightening labour markets and a sharp rise in cyber incidents reshaping project risks locally.

“For project owners and contractors, understanding exposures, coverage conditions and risk controls early can make a real difference to project resilience.

“Insurers and takaful operators have an important role to play in helping businesses identify risks before they materialise, ensuring resilience is built into decisions from the outset,” he said in a statement.

Zurich said labour constraints underline the scale of the challenge, noting the US construction sector alone requires an estimated 349,000 additional workers this year to meet project demand.

Southeast Asia faces a shortfall of about 1.5 million skilled workers, while Australia is expected to see a gap of more than 300,000 by 2027.

The group also warned that digital risk is accelerating, with nearly four in five architecture, engineering and construction firms having experienced a cybersecurity threat in the past two years. It said firms are now facing an average of 226 incidents per company per year, a 41 per cent year-on-year increase.

“Only one per cent of global cyber losses are insured, leaving most of the financial impact to contractors and project owners,” it added.

Zurich said large capital projects continue to run about 80 per cent over budget and more than 50 per cent behind schedule.

It added that the average data centre project now carries a value of US$3 billion, up from US$150 million five years ago, driven by rapid artificial intelligence expansion, highlighting a concentration of risk that is stretching both delivery models and insurance capacity.

The report said insurability is emerging as a leading indicator of project viability and, increasingly, a real-time signal of underlying resilience.

It added that insurance terms often reflect delivery risks earlier than capital markets do, urging project owners and contractors to treat insurability as a key metric alongside cost, schedule, and safety, rather than an afterthought once construction is underway.

'Beyond 2030: The Future of Construction' draws on structured insights from 31 experts across underwriting, claims, risk engineering and construction, based on interviews conducted between December 2025 and March 2026.

The study integrates survey responses assessing the severity of 17 risks to the construction sector on a seven-point scale, as well as their interconnections.

-- BERNAMA