Familiar Concern: Construction’s Labor Woes

While the rise in new business activity in the construction space is exciting for insurers, the decades-long dilemma over a shortage of qualified talent does worry underwriters.

Darren Tasker, North American head of energy and construction at Allianz Commercial, says one of the biggest perils to consider in an environment like today’s is faulty workmanship that leads to design defect, he said.

“For example, last decade, the Canadian economy had their boom,” he said. Worker shortages led to a rise in claims activity with the shortage of labor. “We saw a direct correlation between increased activity, resulting in increased claims around faulty workmanship and design defect, so there is a concern for sure that claims may come to fruition here in the U.S. with the boom.”

The construction sector’s labor shortage is not a new issue, according to Lyndsey Christofer, Chubb’s executive vice president of construction, real estate and hospitality. “As long as I’ve been in construction, labor has been an issue, but it is a growing concern for contractors and it’s being exacerbated now by the size of these new projects,” he said.

Most infrastructure projects used to be under $1 billion. Now, almost every project seems to be over $1 billion, some are tens of billions of dollars,” he said. “So when you’re building something that large, often in a very remote location, finding the labor, the skilled labor, is really challenging.”