Allianz Global Corporate & Specialty (AGCS), one of the leading insurers in the world has analysed the challenges of assessing and managing the risks associated with ‘supertall’ buildings in its latest risk bulletin.

As the insurer of some of the tallest buildings around the world, including the construction of Australia’s Q1 on the Gold Coast, AGCS in its latest Supertall Buildings Risk Bulletin examines the increasing trend of extremely tall buildings and the challenges it presents to insurance companies, with some of them rising a kilometre high.

This year, for instance has seen the 100th ‘supertall’ building being built in the world, rising over 300 metres high. More than half of the world’s tallest buildings have been built in the last four years, with the high rise boom in Asia and Middle East accounting for 90% of all recent supertall projects. With values often exceeding $1 billion, the latest supertall or ‘megatall’ (600+ metres) buildings including the 1km high Kingdom Tower development in Jeddah, pose new challenges for insurers.

By 2020, the average total height of the tallest 20 buildings in the world is expected to be close to 600 metres, comparable to almost two Eiffel Towers, and made possible by a combination of new technologies, innovative building materials and creative design elements.

Ronan Gallagher, Regional Manager Engineering at AGCS Asia Pacific observes that insurance plays a vital role in evaluating and managing the complex risks of these extraordinary projects. He explains that one of the biggest challenges of supertall buildings is associated with safety with many materials being used at the limits of their performance capability.

Significant risks also include pumping and placing concrete at extreme heights, safety issues and fire risk throughout the construction phase. Claims and risk consulting services are therefore, particularly important on a construction site, with close evaluation of past claims essential in preventing future losses.

Insuring billion-dollar buildings

Projects in the supertall category present unique challenges for insurers as well as for architects and contractors. These developments are inherently highly complex as they can involve thousands of workers and over 100 subcontractors. Most of these projects can easily exceed the $1 billion mark, plus a similar amount to cover delays in completion of the project due to material damage events. Insurance for a complete project is, therefore generally provided by a consortium of insurers and reinsurers who collectively are able to cover a total loss of the project.

For the Kingdom Tower project in Jeddah, AGCS is the leading reinsurer of this building, which has an insured value of US$1.5 billion. AGCS also provides speciality coverage for construction defects, termed Inherent Defects Insurance (IDI), which provides cover for damage arising from defects in design, materials or workmanship that were not discovered during construction.