In 1950, there were only two megacities on this planet: New York and Tokyo. Today, Asia alone is already home to 17 megacities - defined as cities with a population of 10 million or more. For the first time in history, more of us currently live in cities than in the country.
By 2030, Asia will be home to half the world's megacities. We will become more vulnerable to extreme weather events and require more natural resources in our thirst for growth and our desire to build. The race for infrastructure, building materials and to build faster and higher will be rapid. Faster and higher…but what about stronger?
Asia will need to be more resilient and acknowledge that covering gaps in the construction, design and materials used long after completion is a necessity to reduce the engineering protection gap. As a society, we must be able to admit that our aggressive nature to construct – and to occupy – buildings can also lead to new risk events.
The global construction industry is projected to grow 3.6% annually from 2018-2022, with the bulk of growth in the Asia Pacific region. Tokyo, with a population of nearly 40 million currently, is bigger than the entire state of California. Closer to Singapore, Metro Manila is home to nearly 25 million with migrants continuing to pour into the capital, while the Indonesian capital of Jakarta has already passed the 30 million mark. Asia doesn't look like slowing down.
Inherent Defect Insurance and making our societies more resilient
Growth could be followed by increased mishaps. Some may be deadly. Some others may knock out essential services, like the roof collapse at Paris' Charles De Gaulle airport in 2004. Just a few months ago, the Indonesia Stock Exchange mezzanine floor collapse left dozens injured, and hamstrung essential financial market access and services in the world's fourth most populous country. The incident was blamed on the loose and corroded joints.
Who then is to blame? What happens if the building has changed owners? How do we get compensation from construction companies that may then blame the company it has sourced materials from?
Inherent Defect Insurance or Latent Defect Insurance, is designed to insure owners or developers for up to 10 years following completion. This protects owners from any design, calculation, specification, workmanship, material or geological investigation shortcomings which threaten the stability of the structural components or causes damage.
More importantly, these policies help rebuild, and adds to the financial safety net for real estate investors. They also set a higher bar for the quality of construction practices. Some countries like France, Spain and Italy have made IDI compulsory.
What's next for Asia?
In quake-prone Japan, it is mandatory to purchase a residential warranty insurance scheme. Shanghai has made IDI mandatory for certain types of buildings, and the Shanghai model is being discussed in provinces - where infrastructure growth has yet to peak and building standards vary. India too has implemented the RERA Act, where builders are liable for structural defects or any other defects in workmanship, quality or provision of their buildings for up to five years.
But governments cannot be the ones leading this front, especially when buying a home or an investment property is one of the signs of success among Asia's growing middle class. Asia's economic success also means there is and will be an expansion of business districts, tech and logistics parks. In both scenarios, IDI brings immense benefit and takes on the risk from commercial entities and middle class homeowners.
We have a dynamic new world in front of us. As an industry, we have a chance to insure more risks, to develop products which fit better to people's modern lives, and to protect assets all around the world to enable economies to bounce back in the time of loss. Insurance, more specifically IDI, helps Asia takes more risks in search of infrastructure growth and real estate investments. Resilience should not be a cost to society, but an investment in our future.
Our IDI experts will be at the Swiss Re's Booth during the coming SIRC event in Singapore and will be happy to answer all your IDI queries.
*Contribution by Andianto P Phan, Head of Engineering SEAI-Sub & ANZ and Patrice Nigon, Head of Engineering Product Centre and IDI Specialist