Super-tall building create dizzying challenge for insurers
With a kilometre-high building planned in Jeddah, Saudi Arabia, insurers will have to grapple with the increasing complexities of providing coverage for the construction and property risks of super-tall structures.
According to data from Allianz Global Corporate and Specialty, 2014 sees the 100th super-tall building over 300 metres built worldwide. Most are located in Asia and the Middle East, which account for 90 percent of recent super-tall projects.
The value of many of the projects exceeds $1 billion, presenting unique challenges to architects, builders and insurers.
Allianz is acting as the re/insurer of the planned Kingdom Tower in Jeddah, which at 1,000 metres will have doubled the height of the world’s tallest building in ten years. The building has an insured value of $1.5 billion.
According to data from Allianz, by 2020, the average total height of the tallest 20 buildings in the world is expected to be close to 600 meters, made possible by a combination of new technologies, innovative building materials and creative design elements.
While there is a definite trend for height, there is also an emphasis upon construction in China, South East Asia and the Middle East. Dubai alone is already home to 20 percent of the world’s tallest 50 buildings, while China boasts 30 of the tallest 100 buildings across 15 cities.
“The eastward trend is set to stay, driven by rapid economic and demographic growth, urbanization, strong investor appetite for flagship real estate assets and lower labor costs than in the traditional Western markets,“ explains Ahmet Batmaz, global head of engineering risk consultants at AGCS.
Allianz says that insuring such mega projects is highly complex and bespoke. Also, with most of the super-tall building being built in emerging markets, “data availability and accuracy can be an additional challenge”.
The re/insurer explained that due to the values involved such projects tend to be backed by consortiums of re/insurers who can deliver the capacity needed for such mega projects. “Insurance plays a vital role in evaluating and managing the complex risks of these extraordinary projects,” says Batmaz.