Davor Car (Marsh McLennan Croatia): Engaging a broker is crucial for the realization of profitable projects

The construction industry is important not only on a global level but is also one of the drivers of growth in the domestic economy. According to data from the Croatian Bureau of Statistics (seasonally adjusted indices), the volume of construction work is increasing, with November 2023 showing a 6.5 percent increase compared to November 2022. Davor Car, Assistant Vice President, Head of Specialties at Marsh McLennan Croatia, part of the leading global professional services firm in risk, strategy, and people, states that it is extremely important for all construction entities to timely recognize current and future risks so that they can respond appropriately and adapt to changing business circumstances.

What are these risks, especially considering the green transition and climate risks?

– There are basic or well-known risks. These include construction or assembly risks, third-party liability, employer liability, contractor liability for environmental pollution, professional liability, risks related to construction facilities and machinery, and insurance of goods in transit. In addition to these risks, practice has shown that financial stakeholders may require protection against financial losses in the event of occurrences that can cause significant project delays, which then leads to financial losses. This coverage is designed to protect against the loss of expected revenues from projects that are delayed in transitioning to the operational phase or servicing costs of debt incurred based on construction, which would otherwise be serviced by operational revenues.

What are the European trends when it comes to insurance in the construction sector?

– We want to bring to the Croatian market an exceptional insurance product that has been widely used in the world for years. This concerns guarantees and bonds for proper job execution. In many sectors of the economy, especially in construction, it is common practice for one party to require the other to provide a guarantee for the proper execution of the contract, most often in the form of a guarantee issued by a commercial bank. Specialized insurance companies can be considered alternative solution providers for many business entities because bonds/guarantees (surety/performance bonds) can be a very useful supplement to a company’s liquidity while not burdening the company’s balance sheet. Of course, it is also recommended to insure all risks of construction contractors as standard and basic coverage, to which additional coverage, including guarantees and bonds, is added.

What do you advise stakeholders considering such a wide range of different risks?

– Regardless of the specific risks involved, it is crucial that construction entities exposed to them contact their broker early enough to clearly articulate the risk and choose the best placement options together with them. Today, contracting with the help of brokers is becoming increasingly common in Croatia because brokers like Marsh d.o.o. understand the exceptionally wide range of risks arising from the construction profession, and at the same time, the responsibility for the adequacy of coverage is transferred to the broker, who guarantees their service financially by possessing a professional liability insurance policy. Significant shifts in the brokerage market are already visible as more construction entrepreneurs engage brokers, which is also a practice in more financially developed Western markets.

How can Marsh McLennan specifically help investors, contractors, engineering consultants, or project partners?

– Marsh’s global team of over 1,200 experts in the construction industry, Marsh Construction Specialty, some of whom are also engaged in Croatia, assists clients in realizing construction projects in all regions of the world. For more than thirty years, we have supported business entities by accurately assessing their risks, minimizing uncertainties, and accepting safety as the sole driver of business. Specifically, it is often a challenge for insurers to create an appetite for a particular risk. To simplify: practice shows that there are situations when a construction entity wants to insure works, but currently, there are no insurers in the Croatian market willing to provide coverage for that specific risk. To realize profitable projects in this sector, it is crucial to engage a broker and implement comprehensive measures to minimize risks.