The construction industry is growing increasingly concerned over the rising levels of project risk putting global infrastructure plans in jeopardy.

insurer Arch International (Arch) issued the warning as it launched its inaugural Construction Risk Report, revealing how geopolitical instability, supply chain disruption, climate change, funding and inflationary pressures, and emerging technologies are increasing levels of project risk.

Based on insights from risk and insurance managers at leading property owners, developers and contractors worldwide, the report reveals that almost 85% of respondents reported at least a moderate increase in risk exposure over the past 12 months. Geopolitical instability emerged as the top risk, cited by 59% of respondents, followed by supply chain disruption (52%) and weather and climate-related events (36%). Cyber breaches and funding and inflationary pressures completed the top five.

Tim Chapman, head of construction, said: “Construction risks are growing more interconnected, making project delivery more challenging and loss scenarios more complex. Insurers have a key role to play in supporting stronger risk assessment and helping clients understand their evolving exposures.”

Geopolitical risk has emerged as a significant concern for the construction sector, influencing procurement decisions, project planning, budgeting and investment strategies. Conflict and government policy were identified as the most material threats, each cited by 53% of respondents.

Stephen Convery, senior underwriter  at Arch added: “Although geopolitical instability has not yet driven a significant increase in construction-related insurance claims, its influence is being felt across the industry. Conflicts such as those in Iran and Ukraine are a stark reminder of just how suddenly events can materialise and how quickly their impact can be felt across global markets.”

Supply chain disruption remains one of construction’s most significant and persistent risks. Organisations reported vulnerabilities across multiple areas, including specialist components (59%), raw materials (56%), logistics (47%), subcontractor labour (41%), and transportation (41%).

Senior construction underwriter, Kevin Lumiste, explained: “Delay risk is becoming one of the biggest challenges facing construction projects today. As lead times for critical equipment extend, contractors are being forced to procure, transport and store materials much earlier than planned, creating a new set of exposures that must be carefully managed from both a project and insurance perspective.”

Weather and climate-related risks are now a prominent part of the sector’s risk profile, with more than three-quarters of respondents reporting increased exposure over the past five years. Flooding was the leading risk (82%), followed by severe convective storms and heatwaves. These hazards are increasingly disrupting project delivery, with 71% of respondents citing more weather-related delays than five years ago.

“Once a secondary concern, flood risk is now a core issue for construction projects, driven by more frequent extreme rainfall events, flash flooding and loss incidents. This is placing greater focus on robust flood risk assessments, mitigation planning and project-specific resilience,” said Chapman.

While familiar challenges persist, organisations are contending with new and emerging risks. Labour availability topped emerging concerns, with 60% of respondents reporting it had moved up their risk registers in the last 2-3 years. New technologies, modern methods of construction and the drive to net zero, whilst positive developments, are also introducing new exposures to navigate.

Construction organisations are responding proactively to these growing challenges. Two-thirds of respondents reported a moderate or significant increase in risk and insurance spend over the past year, while almost three-quarters have increased project contingency allowances over the past five years in response to heightened uncertainty around project costs and delivery.

Chapman said: “The findings point to a clear evolution in the risk landscape facing construction projects, highlighting the need for organisations to reassess their risk management and insurance strategies. Closer collaboration between insurers, brokers and clients is critical. Through earlier engagement and embedding resilience into every stage of project planning and delivery, the industry can continue to adapt, embrace innovation and build a more robust future.”