Bigger may not always be better to insure

Supertall structures, buildings more than 300 metres high or 90 storeys tall, are in vogue right now, raising interesting insurance challenges, according to a recent industry trends report released by the Insurance Institute of Canada.

“Increasingly complex high-rise building projects present significant risk challenges, meaning insurance claims and risk consulting services are particularly important on a construction site,” says a risk bulletin published by Allianz Global Corporate and Specialty, cited in the Institute’s paper.“Impact of any seismic or natural catastrophe activity – in particular flooding during the construction stage; the threat posed by wind loads and fire; choice of building materials, and the unique complexity of managing projects that can involve as many as 10,000 workers and over 100 subcontractors represent the key risk challenges.”

Allianz is the lead reinsurer on the Jeddah Tower development, a one-kilometre-tall tower scheduled for completion in 2020 in Jeddah, Saudi Arabia. The insured value is US$1.5 billion.

Currently, there are more than 100 supertall buildings around the world, according to Allianz. By 2020, 10 of the 20 tallest will be located in China, with the average height of the tallest 20 expected to be around 600 metres. Currently, the world’s tallest building is the 828-metre Burj Khalifa in Dubai, United Arab Emirates.

Canada is one of the eight global construction markets (along with China, U.S., India, Indonesia, U.K., Mexico and Nigeria) predicted to account for 70% of all global growth in construction leading up to 2030, according to the fourth global study by Global Construction Perspectives and Oxford Economics.

Construction has begun on what would be Canada’s tallest supertall skyscraper in downtown Toronto, the YSL building, which is expected to rise to a height of 306 metres (1,003 feet) or 98 storeys tall. Two other supertall buildings proposed for Toronto include 1 Yonge Street (95 storeys) and the Mirvish+Gehry building (92 storeys).

A 53-metre-high student residence in Vancouver, Brock Commons Tallwood House, completed in 2016, is reportedly the tallest timber skyscraper in the world, the Insurance Institute paper notes. But it will be dwarfed when Sumitomo Forestry Company completes a 350-metre, 70-floor “plyskraper” tower in Tokyo (expected in 2041).

Buildings this high do require some risk management around logistical issues.

“Some significant technical issues including pumping and placing concrete at extreme heights; cranage and lifting items to such heights; and significant variation in wind speeds between ground level and higher levels – this affects design and construction works,” Allianz observes. “In addition, maintaining verticality as the building height increases; elastic shortening of constructed building elements as the imposed weight from the completed building increases; maintenance and repairs of inside and external elements; and building services provisions – electrical, water and sewer disposal.”

For these reasons and more, the insured values involved with supertall buildings are increasing with insurance playing a vital role in ensuring such projects advance past the design stage. Today’s newest and largest buildings easily exceed $1 billion or more, as Allianz notes.