The construction industry is facing rising risks from more frequent extreme weather events, Gallagher says in a white paper.
Population increases and the cost of building in the current economy are also adding to the impact of weather events and placing more importance on mitigation and preparation.
“Construction businesses should look to review their existing insurance cover before they are affected by an extreme weather event,” Head of Construction Australia and Asia Roger Irvine says.
“Ignoring weather warnings when it comes to obtaining insurance cover could expose local construction businesses to catastrophic losses.”
Weather events caused estimated losses of $2.56 billion last year compared to $1.22 billion the year before, according to Insurance Council of Australia data cited in the report.
Gallagher says weather risk insurance has historically been a common risk management tool in the power and energy industry and is becoming increasingly available to the construction sector.
The cover works by predetermining a “trigger event” based on weather risk, such as extreme temperature, rainfall or wind, then tailors the payout to reflect the contractor’s financial exposure to the event.
The paper says risk allocation between parties for a project is one of the issues to consider when looking at potential events.
“The wording of both contracts and insurance cover needs to be structured with care,” it says.