Marsh’s Risk in Context podcast series helps listeners better understand key risks, build more effective insurance programs, and think creatively about risk and resilience.

As persistently high inflation affects economies around the world, the construction industry is feeling the effects of increased pricing — from the skyrocketing prices of steel, lumber, and fuel to the significantly increased cost of skilled labor. In this episode of Risk in Context, Richard Gurney, global head of construction within Marsh Specialty, talks to Kelly Outram, head of global contractor development at Marsh, and Gaurav Kapoor, the strategy and operations leader for global construction, about the effect of inflation on the construction industry and actions that contractors and project owners can take to address multiple risks.

On the current state of the construction industry:

We have an environment where contributing factors are and will be impacting the construction industry, such as increasing demand for infrastructure as a stimulus to COVID-impacted economies, increased construction activity driven by measures to alleviate the impacts of climate change, and a shrinking and changing labor market driven by pandemic-related retirement and local restrictions. — Richard Gurney

On the current challenging environment:

The contracting environment is under a lot of pressure at the moment. Construction clients are busy with both existing projects and also new tenders, given some of the post-pandemic recovery. Yet, the increasing cost of materials is rapidly driving up bid prices. And this is presenting a real challenge for our clients. — Kelly Outram

On supply chain challenges:

Supply chain pressures and bottlenecks continue to drive up inflation costs. What we’re seeing is the added challenge of not actually knowing when materials will turn up to site, given the global supply chain challenges, again, having an impact [on] clients through potential project delays. — Kelly Outram

On the effect of inflation on insurance pricing:

The obvious effect on our clients is that the premium is going to increase alongside inflation. … When you think about something like inflation, you might have a situation where in a total loss, you are underinsured as a client if you have not kept up with that inflation trend. — Gaurav Kapoor