Evolving engineering risks require constant investment into know-how

“We’re seeing a growing demand in engineering in line with the positive outlook of the construction industry,” said Jimmy Keime, head of engineering and nuclear at Swiss Re, who also highlighted the significant shift towards renewable energy projects.

“In the current landscape, the engineering insurance market is confronted with increasing and more complex risks and technology is evolving rapidly. Swiss Re is keenly aware of these evolving risks and is adapting its strategies accordingly,” he said.

“For example, new photovoltaic solar plants are being built in highly exposed areas, such as flood-prone zones and earthquake-prone regions, particularly in areas vulnerable to severe convective storms.

“We invest constantly in our tools to ensure that we keep up with these trends, making them available to our clients,” Keime explained.

Swiss Re’s digital suite, notably the Puma offering, exemplifies its commitment to providing insights and tools that help clients analyse risks effectively.

“At Swiss Re, our business is to understand these evolving risks,” Keime noted.

“We want to ensure that we price and help mitigate risks related to climate change and new technologies.”

This proactive approach is particularly crucial in the renewable energy sector, where Swiss Re has invested significantly in knowledge and data insights, establishing a dedicated Centre of Competence for Renewable Energy.

“We expect the world to add as much renewable power in the next five years as it did in the last 20.”

The centre plays a vital role in supporting clients, as Keime explained. “We help our clients reduce their risk exposure and ensure project quality through various channels,” he said.

The centre collaborates closely with clients, providing insights derived from best practices such as those described in Swiss Re’s Code of Practice and sharing valuable data on factors such as the minimum glass thickness of photovoltaic panels based on hail exposure.

The shift towards sustainability is reshaping the re/insurance industry, and Keime highlighted the growing demand for renewable energy, stating: “We expect the world to add as much renewable power in the next five years as it did in the last 20.”

He added that substantial investments were projected in wind and photovoltaic technologies, noting: “These technologies are now cost-competitive for electricity production capacity, and we believe their capacity will triple by 2030.”

Growth prospects

Keime identifies the engineering sector as a promising area for growth and stated: “Global construction output is expected to grow by $4.2 trillion over the next 15 years to almost $14 trillion.

“China, the US, and India will lead this growth, accounting for 50 percent of the overall increase.”

This growth is further boosted by reindustrialisation efforts following the COVID-19 pandemic and ongoing geopolitical tensions that have exposed the fragility of global supply chains.

The concepts of “reshoring” and “friend-shoring” are becoming increasingly relevant, with Keime indicating that these strategies could generate an additional $33 billion in premiums over the next five years.

Keime identified three major risks when underwriting large engineering projects: technology, the climate and supply chains.

“In technology risks, we’re seeing gigawatt storage projects such as data centres and semiconductor plants being built in regions where we lack experience,” he stated.

“Climate risks, particularly floods, have for example in Eastern Europe impacted the automotive supply chain and solar plants in the UAE,” he continued.

Supply chain risks have become more pronounced, according to Keime, with disruptions caused by nat cat events or geopolitical events and sanctions leading to cost overruns and construction delays.

“Major components of a project can be damaged, causing higher material damage and business interruption claims,” he noted, highlighting the interdependencies that can complicate project delivery.

Keime pointed to the reuse of building materials as a growing trend, and he questions whether materials used in older constructions could be safely reused in new projects and the impact it could have on insurance coverage.

He highlighted innovations such as cross-laminated timber and “green” concrete, noting the lack of experience and data surrounding their long-term durability and performance. Green, or low-carbon, concrete, is designed to reduce the carbon footprint of traditional concrete production. It uses alternative materials such as fly ash, slag, recycled aggregates, or carbon capture technologies to lower the amount of cement required, which reduces greenhouse gas emissions associated with cement manufacturing.

“Cement production represents 8 percent of global carbon dioxide emissions, so there is a clear need for change. At the same time, we must ensure that green concrete meets the same safety and longevity standards as traditional concrete, which we have used for the last 200 years” he stated.

Swiss Re actively monitors these innovations and collaborates with industry experts to navigate these complex risks.

Keime reiterated the importance of ongoing discussions with clients and partners. “The risk landscape is evolving faster than ever,” he said.

“We’re investing in knowledge for ourselves and to share with our clients, ensuring we will be able to meet the growing demand and find solutions to insure the future.”

Jimmy Keime is head of engineering and nuclear at Swiss Re.

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