Community of Practice - Managing construction risk round up
CIRIA had a soft launch for a new Community of Practice (CoP) focused on managing risk in construction.
CIRIA launched the new community of practice (CoP) on Managing Construction Risk (MCR) on 8 December, bringing together the worlds of construction and insurance and increasing mutual understanding of the key challenges and good practice. The launch touched on several topics, from design risk and water damage in contracts works to Professional Indemnity Insurance (PII) and project insurance. The community will set up subsequent discussions and webinars on these topics between now and Q3 in 2021. Founding members include EA, Highways England, Landsec, Aon, Laing O’Rourke and Jacobs. The community is also supported by key stakeholders such as IUA, AIRMIC, CIREG and Lloyd’s Register.
Chair and host Dirk Vennix, CEO,CIRIA, talked about the management of risk as a perennial issue for the construction and management of assets. To support the development of good practice in risk management CIRIA has delivered guidance such as “Code of Practice for Property Flood Resilience” and “Control of risk: a guide to the systematic management of risk from construction”. CIRIA also has a proven track record of developing communities of practice to support industry good practice and performance improvement. They include specialist contaminated land networks and a practitioner community that provides a range of events, awards and resources for those involved in delivering local flood risk management and sustainable drain systems.
After extensive consultation with insurance providers, clients, contractors and consultancies CIRIA has developed a new Community of Practice focusing on improving understanding of how insurance policies are being developed and enhancing knowledge of how the construction sector operates to control risk. Key outputs will be a series of quarterly network events and collation of resources within one point of reference. Community events will highlight challenges for raising awareness and collaboration and put forward good practice. CIRIA will also collate materials from multiple trade bodies and practitioners across a variety of risk management areas and make this information freely accessible on a CIRIA portal. If your organisation would like to join the new CoP please email firstname.lastname@example.org.
Keith Bishop, Group Insurance Manager Laing O’Rourke shared a presentation about managing risk within contracts works.
He summarised project risks in three categories: insurable, limited insurance and uninsurable. Insurable risks include PII, contractors’ risks related to damage to existing structures and property policies covering construction works. Limited insurance is available for defects insurance, environmental impairment, delay start up, insolvency and political risks. Uninsurable are events such as cost overruns, site conditions, consents and general business risks.
The presentation focused on contracts works and the impact of water damage. This is 38% of claims by insurance and 60% of claims by number of incidents. Claims vary from £10m to £100m plus. More than 75% claims relate to joint failure or outlets left open which are avoidable with rigorous test processes and risk management.
All parties have a role to play in tackling these challenges. Designers could impact risks through product selection and system design whilst clients are able to specify preventative requirements in their briefs and contract terms. Contractors could also put in place robust risk management processes and quick incident responses. Insurers have a range of options from increased premiums and excesses as well as imposing conditions such as automated water shut off valves.
There is guidance on the escape of water but this does not appear to have percolated through the industry and has not been widely adopted. Keith asked attendees if they would support him in exploring further tools which could be implemented by the supply chain.
Suzanne Moore, Executive Director of Operations at Jacobs outlined their approach which identified programme risk through a monthly risk cycle. She mentioned key risks including GI and other surveys and delays caused by stats and archaeology.
Chris Jones, Director of Legal and Market Services at the International Underwriters Association talked about the benefits and challenges of delivering insurance policies.
It has become more challenging to provide innovative, bespoke solutions with regard to the PII market across all industry sectors. Some insurers have left the market through institutional fatigue. There are challenges around decreasing confidence in being able to accommodate liabilities for historic failures of regulation which was not fit for purpose. Looking forward Chris stressed the need for better clarity of roles in the short-term and cultural change in the long-term.
There is some interest from clients in project insurance but there is limited insurer appetite for single project risks and it is often used as a specialist product within strict parameters: e.g. for very large projects with a lot of limitations.
In the Q&A a panel of experts including Mark Courtneidge (Director of the Contractor Team within the Construction & Power Division. Aon), Veronica Flint-Williams (Contract and Risk Manager, Environment Agency), Karl Miller (Utilities Sector Manager, Lloyd’s Register) and Neil Timberlake (Group Insurance Director, Landsec) picked up the salient points from the presentations.
Dirk Vennix also asked the panellists which topics should be covered by the new CoP.
- Mark Courtneidge thought the community of practice could consider how the industry could better serve its suppliers around water damage and better understand the risks involved. He also said that new technology had introduced risk which is difficult to understand. Veronica Flint-Williams added that the EA often find there are issues around site conditions, weather, water and third party property. Karl Miller said he was also interested in further educational work on water damage as from his experience with BOPAS assessments in MMC projects there are often issues with risk management of water ingress in buildings on work sites.
- Neil Timberlake reiterated that understanding risk at an early stage was critical. For example, with the use of CLT in construction the insurance industry needed to understand the risk and get behind its use. Risk had to be assessed on a project by project basis. There was a danger that everyone in the industry was being tarred with the same brush.
- Veronica Flint-Williams agreed with Neil. The industry had to take insurers with us. We didn’t engage sufficiently with them and a strong understanding of the approaches by all parties was needed. Veronica added that it is not always clear when a risk is passed on to a party even when it’s stipulated in contract clauses.
- Mark Courtneidge said that the use of project insurance required a clearer and better understanding of the blockers. It is a possible solution to risk sharing but how can the risks be balanced and how could this be achieved? Veronica Flint-Williams thought Chris Jones has been right to highlight the issue of competence.
- Karl Miller highlighted the issue of quality of risk management. It’s not about the obligation of doing it; the most important issue was really assessing the risk.
- Dirk Vennix concluded the Q&A by saying there was plenty of work to do for the new community of practice and CIRIA would be planning its programme of events for 2021 shortly.