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There is a growing body of interests in construction insurance, supporting interactions between the construction industry and the insurance industry. However, it is not always clear why construction insurance exists and how it operates from the perspective of the construction industry. This paper argues that to provide a convincing explanation on this interaction, one needs to improve the theoretical and analytic frameworks in four key areas: the nature of construction risks, risk transfer and insurance mechanism, insurable risks, and perspectives on risks from concerned parties.

They explain how insurance can be used as a risk transfer tool in the construction industry and examine the interaction between risk management and insurance. The existing literature on construction insurance is reviewed in the light of this analysis to identify key gaps in knowledge and help to focus further the research priorities. A better understanding of construction insurance can contribute to successful risk management performance on projects.

Construction insurance is a practice of exchanging a contingent claim for a fixed payment to protect the interests of parties involved in a construction project. Construction insurance is a major method of managing risks in the construction industry. Its primary function is to transfer certain risks from clients, contractors, subcontractors and other parties involved in the construction project to insurers to provide contingent funding in time of difficulty. Construction insurance plays an increasingly important role in guaranteeing the success of projects, with insurers sharing losses resulting from natural disasters and other contingencies. However, insurance sometimes doesn’t receive the attention it deserves because practitioners do not have a clear understanding of risk allocation and the strategy of risk management through insurance.

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