The Civil Engineering Contractor November 2018 | Page 40

BUSINESS INTEL
Catastrophic weather events —
a new era of construction methods
By Eamonn Ryan
A storm is brewing in the construction sector. Whether or not
one believes in man-made climate change theories, there is
growing evidence that the climate is altering, with many more
— and worse — catastrophic weather events predicted. Will
property remain insurable?
A
cross the globe, there is
mounting evidence that
we are entering an era of
increased natural catastrophes. South
Africa commonly has one a year but
last year had three: the fires in Knysna,
the drought in the Western Cape,
and storms in Gauteng and KwaZulu-
Natal (including a tornado near
Johannesburg). The average for much
of the past decade has been one such
event a year.
In 2017, weather-influenced claims
exceeded R3-billion, of which R500-
million was paid in claims, according
to global risk and insurance company
Tshepo Mofubetsoana, broker centre
manager: Construction & Engineering at
Aon South Africa.
Michael Viterenwa, senior broker:
Construction & Engineering at Aon
38 | CEC November 2018
Aon. Last year also marked the first
year since 2005 that four hurricanes
made US landfall in one season:
Hurricanes Harvey, Irma, and Maria
struck the US in rapid succession, all
making landfall as Category 4 storms.
After that trio, Hurricane Nate made
landfall as a Category 1 storm, making
the four-hurricane record. These
catastrophic events may be giving us a
foretaste of what is to come.
Munich Re, in an overview of natural
catastrophes in 2017, says last year’s
claims is the second-highest figure
ever recorded for natural disasters,
which was only surpassed in 2011,
when the Tohoku earthquake in Japan
and floods in Thailand contributed to
overall losses of USD354-billion in
today’s dollars. The overall loss figure
of USD330-billion, for all types of
natural disasters, was almost double
the 10-year, inflation-adjusted average
of USD170-billion, says Munich Re.
Aon’s Weather, Climate & Catastrophe
Insight 2017 reports that weather-
related losses totalled USD344-
billion, more than double the previous
year. “The third quarter of 2017 was
the second-costliest quarter ever
registered at USD261-billion due to
catastrophic damage caused by a trio of
major hurricanes and flooding across
Asia,” says the report.
This will in time — if it has not
already — impact the requirements
of the built environment. Unless there
can be greater engineered resilience
to withstand such storms, access to
insurance may become scarcer in the
future. This points to a need for insurers
and engineers to work together in
preparation for catastrophes. Though
extreme weather events are by their
nature localised, what happens in
the US or Europe impacts the price
of insurance in South Africa, since
all insurers are required to purchase
reinsurance. This in turn reflects
global rather than local events.
Tshepo Mofubetsoana, broker
centre manager: Construction &
Engineering at Aon South Africa,
explains the challenge in matching
underwriting to sudden climatic
change: Underwriters look on average
at 30-year historical statistics, and
could only attribute events to climate
change when they have 30 years of
statistics. “No trends in climate change
have yet been picked up and no action
taken actuarily. So far, there is no
evidence of extreme weather events
being priced into premiums, as these
are largely based on historical data.”
Construction must respond
Mofubetsoana suggests that the
construction industry may become
compelled to look at upgrading
standard specifications of building.
“We’re seeing a lot of so-called
‘green’ buildings being constructed,
but the verdict is still out on whether
these buildings are catastrophe-proof.
Technology-wise and engineering-
wise, the industry is going to have to
adapt to increasing disasters.”
Michael Viterenwa, senior broker:
Construction & Engineering at Aon,
suggests that the short-term answer
of insurers may be to withdraw cover
for some forms of natural disaster, in
the way that war risks are currently
not covered. Until then, he explains
that the way insurers will look at
underwriting is to look at historical
data and risk profile and apply a rating
against that. “However, my personal
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