From Design to Operation: Managing End-to-End Risk on Linear Infrastructure Projects in Asia Pacific

Asia Pacific (APAC) is undergoing a major boom in transport construction. Governments and private developers across the region are making large investments in new road, rail and energy corridors. “In Vietnam, high-speed rail development is accelerating and rail connections in Thailand are also crisscrossing the country, connecting it to its neighbours” says Vincent Banton, Head of Construction and Infrastructure for Aon Asia. “Across the broader region, the pipeline of rail construction alone runs into the trillions of dollars.”

The nature of risk across these projects stands apart from a single spot located construction site. A linear construction corridor can traverse mountains, floodplains, fault lines and coastlines, spanning many hazard zones within a single project. Standard construction risk and insurance programs, built around single sites with contained exposures, can leave these billion-dollar projects exposed to significant risks for timelines, build quality and project financing.

Physical Risk is a Moving Target

For a building or single bridge, project teams can identify the hazard environment, model exposures and build an insurance program around a clear set of parameters. Linear projects are larger in scale, but the risk complexity is multiplied by more than the distance covered by the road, rail or pipeline footprint.

“With a linear project you’re going over multiple different territories, districts or countries,” says Banton. “Even within a single country, a construction corridor can traverse different climate or seismic zones. Our team have worked on roads in New Zealand crossing at least three distinct fault zones and a highway in Australia moving from floodplains into baron outback. These are just some examples of infrastructure that requires completely different design standards and construction materials in each section.”

Geotechnical profiles across these projects can vary as much as the surface hazard environment. A structural approach suited to sections of hard rock must be adapted when building on compressible ground or substances prone to liquefaction. This introduces multiple design packages, multiple contractors, and a complex set of coordination risks. Added to this are the different construction requirements for tunnels, cut-and-cover sections, elevated rail bridges, embankments and coastal causeways, meaning the layers of construction complexity and hazards add up to a unique and challenging risk profile.

What Better Risk Intelligence Makes Possible

Having a detailed view of these risks, informed by data from detailed modelling of geotechnical and weather conditions along the route can add significantly to project resilience and bankability. Better risk visibility can influence route selection, design, contracting and financing, and prompt early-stage discussions on risk to prevent major issues with project schedules, finance and costs. This early engagement with risk advisory and insurers can ensure proper consideration is given to project resilience during every pre-construction phase, including design, contract and finance negotiations.

“Risk on these projects is generally treated as part of a procurement checklist, with generic risk registers and limited contingency applied. This creates reliance on insurance and contracts for mitigation rather than taking the opportunity to reduce risk through design and engineering that accounts for the many variables along the project path.”

– Vincent Banton, Head of Construction and Infrastructure, Aon Asia

Natural catastrophe modelling, covering earthquake, typhoon, flood, landslide and storm surge risk across the entire project gives project owners a clear picture of how risk builds along the corridor and where it peaks. Geospatial analysis adds a further overlay, to identify risk hotspots and the specific vulnerability profile of each segment type.

Aon’s Climate Risk Monitoring tool extends this modelling and analysis further, offering a future view on how hazard conditions along a specific alignment are likely to change over decades based on different climate scenarios. This is a critical input for projects developed under long-term concessions, where the weather risk environment for the completed route can be significantly different from the prevailing climate zone during design.

Insurance Program Design for the Full Project Lifecycle

The value of this risk intelligence increases when carried through to the project’s insurance program. This means coverage structured around the project’s full risk profile across every segment and types of cover specific to the nature of linear delivery, operation and financing arrangements. “Linear projects are inherently sequential,” says Banton. “Every section must be completed before the asset can fully open, although phasing of sections into operation while other works continue is also common and introduces further complex risk in terms of coordination and interface. Delay in Start-Up (DSU) coverage can be a requirement for lenders in non-recourse PPP structures. It provides them with protection for loan repayments if the project does not open on time and revenue, from tolls for example, cannot be collected.”

Parametric structures can resolve one of the most persistent problems on these projects — establishing exactly where and when a weather event occurred across a corridor spanning hundreds of kilometres. Planning the transition from construction to operational insurance also needs to start well before practical completion, ensuring that cover reflects the asset’s ongoing risk profile rather than carrying forward assumptions made during the build phase.

“Using multi-hazard modelling across the full corridor, and expert engagement with project owners and contractors, we can support risk response and mitigation that helps meet insurer and lender requirements.”

– Vincent Banton, Head of Construction and Infrastructure, Aon Asia

Regional Expertise Across Project Realities and Risks

For clients in Asia Pacific, the complexity of linear construction risk is increased by the variety of regulatory environments and insurance markets. Aon’s construction and infrastructure teams have hands-on experience with complex, cross-border linear projects in markets including Vietnam, Thailand, Indonesia and the Philippines, where the current linear construction project pipeline is most active.

“Our team includes experts who have actually built these projects as engineers and underwritten them as insurers,” says Banton. “They understand the project logistics, how they’re built, how contractors operate and how risk can be assessed and mitigated across contracts and insurance.” This depth of knowledge enables Aon to take corridor risk analytics and use them to develop practical risk management and insurance programs. The analysis and insights that underpin these programs can also support project owners in their conversations with lenders and rating agencies to assure them that project resilience has been properly explored.

Linear infrastructure projects in APAC are major long-term investments that will move people and goods across the region for generations to come. Managing risks coming from their scale and complexity requires an approach combining full-alignment natural catastrophe, climate and geospatial analysis with construction risk advisory and whole-of-life insurance program design. Having this capability on board from the earliest stages of project development can turn a sequence of accumulated risk exposures into a project built to last.

To find out more about how Aon’s construction and infrastructure team supports owners, contractors and lenders on complex linear projects in Asia Pacific, visit our Construction and Infrastructure page, or contact us to discuss risk, insurance and project resilience for your next corridor development.

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