Data centres to energy transition: Emerging risk and opportunity in construction

Hello everyone, welcome to Insurance Business TV as we get an update on the state of the construction insurance market with Axis. There have been a host of outside factors influencing the landscape from geopolitics to supply chain issues, but where does the market stand now? In this edition, we're meeting Raj Brar, who is Head of Construction Global Markets at Axis, for his take on where the challenges sit and where the opportunities lie. Raj, welcome to Insurance Business TV. Thank you, Paul. Thank you for having me. So Raj, just talk to us about where the construction market is in the cycle right now. The construction market is in a dynamic place. I think we've enjoyed some steady price rises since 2018, where you had a combination of large loss activity and basically underpricing, and that caused a lot of people to withdraw from the marketplace. But if you run that forwards seven years to now, competition is definitely hotting up. We've had new entrants in London and global players around the world are stepping back into construction, and that will definitely have a knock-on effect and exert pricing pressure in certain sectors. However, there's still a lot of opportunities and a lot of things to be positive about. I think the more complex risks, where they are more technical and require more technical underwriting expertise, the pricing there will be better. And we're very fortunate. We have the underwriting team here at Axis that can handle those risks really effectively. And on top of that, it's just not to forget, we're still in a much better place than we were, probably 2018, 19 and 20. And that's a positive thing that we shouldn't forget in terms of where we've come from on this journey. We take a very long-term approach to construction. We're here for the long term. So I'd say to our key distribution partners and clients, when there's any type of change, we are with you on this journey. So it's a dynamic market. You're speaking very positively there, but there is a cloud hanging over it, of course, in the form of the macroeconomic and political climate. So just tell us a little bit about how that's impacting the risk landscape of construction. It always has a huge impact on what we do as construction insurers, because ultimately, if people stop building, we can't insure it. However, there's constantly change and challenge in the construction market. And I think if we are adaptable, and we manage it properly and be proactive, it's something that we can manage. For example, big talking point this year was tariffs. But I'd just like to say tariffs aren't anything new. It's something that has always been involved in construction. It's just the magnitude and the frequency of the changes we have to manage. If we look at climate change, that's like a dual challenge for our clients. They are now building their project, maybe in more potentially hazardous situations in terms of high climate volatility, but also facing the challenge of new ESG requirements. I think the fortunate thing here is that we are a specialty insurer, and we can help them with both of those challenges. There is always change in construction. There are always new challenges. What we're talking about now, you can look back a few years, we were talking about high inflation, or before that, even high interest rates. So that's something that we're used to doing. We are adaptable. We are able to work with the changes that come through with us. And the global portfolio, we're not exposed to just one economy or one political decision. So we really have a robust long-term view for a global construction portfolio. So no knee-jerk reactions can see this through. So you said that Axis is there to help, but just tell us a little bit more about that. How exactly is Axis responding to this climate? We've invested heavily in our underwriting team. We now have a very experienced, broad range of skills, multi-talented underwriting team, which is key. What might be less visible to our broken partners, we've also invested heavily in operations. We've got a very slick operations team that really support the underwriters to get out there and do what they do best. And our claims team, ultimately, this is why we're here. That's when the clients really need us. That's where our claims team really come to the fore. And then if we sort of step to the other side of the table with our brokers and clients and what they need from us, I think it's key when there's any type of change in the market, that what they get from us is consistency and clarity of message. I think we really effectively communicate that to them because what we are here for is for the long term. So I'd like to say to all of our partners, if you have a five-year project, be comfortable bringing it to us. We will underwrite that for you. I will be with you along the whole journey. So if there is a large claim in year five, we'll be here to pay that. We'll be here to pay that, help you rebuild, help you on your way to your project is finally finished. And then when it's all said and done, we'll be here for your next project as well. Of course, if we can talk a little bit about you for a moment, you're in a relatively new role as head of construction for Axis in London. So just tell us what are your plans for this portfolio? Well, firstly, thank you. It was a real privilege to be asked to lead this team, not only its reputation within Axis, but also its reputation in the wider marketplace. I've been very fortunate to already take over a team with some great underwriters already on board and very excited to be welcoming two new, really senior staff members in the next couple of months as well. And I really see my position here as twofold. Firstly, to really support the underwriting team, make sure they've got the right models, systems and tools to do their jobs efficiently. But then on top of that, from a strategic point of view, Axis is a specialty insurer. We do a lot of things and we do them really, really well. So really leveraging that, talking to the other teams, looking at our marketing and our distribution to make sure our underwriters see as many of the good opportunities as possible. We have worked really hard over the last nine years to build up, I think, what is quite a unique offering in the market. You could look at one contractor with one forklift on one side of the spectrum. And on the other side of the spectrum, you could see a billion dollar refinery project. And we can cover the whole spectrum. So wherever we're in that, that will be, we are here for our clients to support their needs on that basis. I like how you described the opportunities for your team there, but let's take it to a wider scale if we can. Where do you see the greatest opportunities in construction at large? The first two that spring to mind are the energy transition and also the recent heavy investment in data centres. If we look at the energy transition, that's not just an insurance issue, that's a global initiative for the betterment of society. And we are quite fortunate, we have a number of lines of business here that we can support clients on their journey to reduce their carbon footprint. And as Axis, you know, there's no better statement of intent than when we launched the Energy Transition Syndicate 2050 to help provide multi-class solutions to our clients' carbon reduction needs. And if we look at data centres, then we'll agree, AI is a growing part of everyday life, there's no getting away from it. And that demand is only going to increase over time. So that requires investment, that requires new data centres to make sure this all works, and we will be providing insurance solutions to our clients who are also investing in that. I've been doing this for over two decades, the construction market is always evolving and always changing. And so we might not know right now what the next real big opportunity or challenge will be in three or four years' time. But I can safely say here at Axis, with the underwriting depth we had and the expertise, we'll be more than happy to meet the challenge or potential head-on, whatever it may be. Well, huge thanks for your time, Raj, some inspiring words there. Dare I say you've given everyone the foundations to build on. And of course, for more insights from experts like Raj, we'll just keep it right here on Insurance Business TV.