But Hong Kong's also experiencing strong growth.
Leaders from the construction, finance and insurance industries came together in Hong Kong recently to discuss the shift of the global construction industry and the importance of managing risk as entities expand their infrastructure footprint.
According to a release from AIG, the discussion took place in conjunction with the launch of new research by AIG which found that for the first time construction in emerging markets is now outpacing developed markets.
Daniel Abramson, AIG’s Global Head of Construction, says this shift is in significant part being driven by emerging countries in Asia where population growth and urbanisation is creating the need for more construction investment.
Here's more from AIG:
“Last year 52 per cent of the world’s construction came from emerging markets. By 2025 we expect this figure to grow to by more than 60 per cent with big infrastructure projects in China and India set to lead the way,” Mr. Abramson says.
Despite the rapid rise of emerging markets, Hong Kong is also experiencing strong growth particularly in the infrastructure construction sector which now accounts for 47 per cent of the industry.
Largely being driven by the government’s investment in water infrastructure as it looks to reduce its dependency on Mainland China’s water resources, the sector is expected to grow from HK$82.6 billion last year to HK$130.4 billion in 2018.
Rudi Spaan, AIG’s Head of Broker & Client Management, says the globalisation of the industry is also adding more risk to each project.
“Today, projects involve a global supply chain where materials and equipment are sourced all over the world and this inherently increases the risk. 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,” Mr. Spaan says.
Companies, therefore, need to look for tailored solutions to ensure they implement world-class risk management strategies that are tailored specifically to their project because in today’s environment there is no one-size-fits-all strategy, he says.
“With the largest capacity among global insurers, AIG Construction Policies offer up to US$225 million per risk on a Probable Maximum Loss basis and Policy Limits in excess of US$1 billion. AIG also can offer up to US$150 million in ground-up Liability covers.
The bottom line is that AIG offers risk solutions to Construction Companies that provide them with the Global Cover they need in this ever-changing, dynamic and complex market place,” Mr. Spaan says.
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