In the bustling construction markets of Indonesia, a silent storm of claims is brewing, and a groundbreaking study is shedding light on the eye of the storm. Construction All-Risk (CAR) insurance, a staple in the industry, is revealing its secrets, and the insights could reshape how we approach risk management, particularly in the energy sector.
At the heart of this revelation is Andreas Arianto Pramudya, a researcher from Parahyangan Catholic University. His study, published in the journal ‘Construction Economics and Building’ (Ekonomi Konstruksi dan Pembangunan), delves into the historical data of two major Indonesian insurance firms, mapping the risks that CAR insurance covers and the claims they generate. The findings are eye-opening, with six primary risks accounting for a staggering 77% of overall claim values.
“When we started this research, we expected to find a wide distribution of risks,” Pramudya explains. “But the data told a different story. A few risks were dominating the claims landscape.”
So, what are these risks? At the top of the list are natural disasters, with “hurricanes and storms” and “heavy rain, lightning, and flooding” leading the charge. But the list also includes man-made risks like “poor quality of work” and “fire, exposure, short circuit, and electrical failure.” These findings underscore the need for robust risk management strategies, especially in the energy sector, where the stakes are high, and the impacts of these risks can be catastrophic.
The study also highlights the geographical factor in claim values. This is a crucial insight for the energy sector, where projects are often sprawled across vast, diverse landscapes. Understanding how location influences risk can help in better planning and mitigation strategies.
But perhaps the most thought-provoking finding is the lack of significant differences in claim values based on work progress status or project type. This suggests that risks are pervasive and can strike at any stage of a project, regardless of its nature. It’s a wake-up call for the industry to be vigilant and proactive in risk management.
So, how might this research shape future developments? For one, it could lead to more tailored CAR insurance policies, with premiums and coverage reflecting the specific risks of a project’s location and stage. It could also spur the development of new risk management tools and technologies, helping the industry to better predict, prevent, and mitigate potential losses.
Moreover, this study serves as a call to action for the industry to invest more in risk management. As Pramudya puts it, “The costs of prevention are often far less than the costs of repair. It’s an investment that pays off in the long run.”
The energy sector, with its complex projects and high-risk environments, stands to benefit significantly from these insights. By understanding and addressing these risks, the sector can enhance its resilience, reduce losses, and ultimately, drive more sustainable growth. The storm of claims in the construction market is far from over, but with studies like Pramudya’s, we’re better equipped to weather it.
