Inherent Defects Insurance: An Overlooked Tool in GCC Construction Projects

According to the World Bank, gross domestic product across the Gulf Cooperation Council (GCC) is expected to increase 2.1% in 2018 and 2.7% in 2019. The volume of construction projects — both planned and in progress — and the wider strategic initiatives being set in motion by the region’s governments, give cause for optimism in terms of future construction expenditure and activity.

These developments command significant capital, meaning that developers and project owners must manage a variety of risks to protect their investments. However, structural defects to completed properties continue to expose numerous stakeholders to financial risk.

In this report we examine potential exposures to inherent defects for constructed assets, and the role inherent defects insurance (IDI) can play in mitigating the risk. Despite the potential significant balance sheet exposure should such defects cause structural damage, there is relatively little awareness about the issue in the GCC region.

Our report looks at:

• Typical insurance strategies for GCC construction projects.

• Inherent defects and the role of professional indemnity insurance.

• Where IDI fits in relation to traditional insurance policies.

• The benefits of IDI and its status in the GCC region moving forward.

For more information, download the report.