A recent study from a global think tank Willis, a WTW company, said that amid the soaring data center projects propelled by the swift pace of technological advancement and the future demands of artificial intelligence (AI), the world construction industry remains beset by various challenges.

The Willis Global Construction Rate Trend Report for the first quarter of the year said the data center boom is set against the sobering reality of labor scarcities and escalating material expenses, which present formidable obstacles for both construction and insurance domains.

“In Asia, the construction industry is set to experience continued growth this year as a result of both government stimulus and private investments. This drives positive changes in the insurance markets,” said Nicki Tilney, Head of Construction and Natural Resources, Asia at Willis.

Increased momentum towards sustainability

“From large-scale infrastructure projects to the development of smart cities, the region continues its path of delivering complex and sustainable construction. The increased momentum towards sustainability is also a powerful force propelling construction activity in Asia,” he said in a statement sent to the DAILY TRIBUNE.

Moreover, Tilney said despite robust growth forecasts and the drive for sustainability in the region, several critical issues are emerging in Asia, one of which is the shortage of skilled labor, a problem that can lead to poor-quality construction and reduced adherence to safety protocols, prompting insurance markets to closely scrutinize project schedules and costs.

Supply chain management a challenge

The study has also found that supply chain management is another ongoing challenge.

“The availability and timely delivery of materials is critical to the success of any construction project. Disruptions in the supply chain can potentially cause significant delays and cost overruns and impact the financial stability of contractors and the projects,” the report said.

Natural catastrophe (NatCat) exposures likewise continue to be a key risk concern across the region, prompting insurers to remain focused on managing and adequately pricing a project’s exposure to NatCat risk.

“We recognize the significance and susceptibility of Asia to NatCat events, most recently witnessed by the devastating earthquake affecting Myanmar and Thailand. Events such as this are disastrous and underscore the importance of understanding and addressing the heightened vulnerability of Asian projects to NatCat risk, so that these exposures can be mitigated through robust project design and safety management,” Tilney added.

Other key findings

Furthermore, key findings of the study stressed that economic factors also play a significant role in the global construction insurance market.

The ongoing rise in building material costs is pushing project expenses upward, resulting in increased insurance premiums, and the recent surge in tariffs, particularly for construction material imports and exports, is anticipated to further amplify these cost pressures.

Increasing the use of modular construction is one innovative approach that can help address the cost and supply chain issues.

By pre-fabricating components offsite, onsite construction time can be reduced and mitigate risks associated with supply chain disruptions, the study noted.

AI use brings new set of challenges

As the construction industry in Asia continues to evolve, the use of AI in the sector also brings a new set of challenges and complexities for the insurance industry to navigate.

According to Tinley, “As AI’s role extends from project management to design and even construction, the potential for more novel risks, such as cyber threats, data security, and system failures, expands. This shift and exposure to new vulnerabilities will need us to adopt a more comprehensive approach to managing these emerging risks.”