The following article on the current state of the building sector – of which HVAC is a key component – was written by Jonathan Kaiser, manager at SHA Risk Specialists. This is Part 2 of a two-part series.

Aesthetic designs should never trump functionality. ©RACA Journal
Costs exceed the tendered amount
There is an alarming trend gaining traction in South Africa, more especially amongst governmental departments and those special ‘recovery’ institutions, to sue professionals on the basis that the project cost more than what had been budgeted for. The basis of the claim being, since the professional undertook to bring home the project at a certain cost (irrespective of external factors), any additional or unforeseen costs to bring the project up must be carried by the professional team. This problem is amplified where the professional team conducted only cursory feasibility studies. Fixed price contracts pose the same risk.
Why is it raining indoors?
Time after time, claims are notified owing to water ingress into buildings. The apparent lack of proper consideration and application of waterproofing is extremely concerning. Aesthetic designs should never trump functionality. Tried and tested methods should be preferred over experimental solutions.
Recent studies have shown that human-induced global warming has contributed to increased flooding. Over the last century, and with a specific focus on KZN, catastrophic flood events have risen from an average of 1.1 occurrences per year to an average of 1.7 per year. The April 2022 KZN flood, where over 300mm of rain fell in one day, was the most catastrophic flood event in South Africa in recent years resulting in estimated ZAR 35 billion worth of damages.
Historic data though points to the fact that KZN has habitually been at the receiving end of catastrophic flooding. More than a hundred years ago a similar event occurred which resulted in rainfall of over 1000mm over the span of a few days. So called ‘one in a thousand’ year events are becoming all too frequent for that classification to remain relevant. Engineers are often not called upon to design for 1:1000 events. Are modern designs accommodating this risk? To us, it appears not.
One of the biggest problems we see in the built industry relates to construction designs not factoring in the increased levels of water/rainfall and with inadequate drainage systems. We must improve city infrastructure, particularly drainage systems, to better prepare for heavy rainfall and flooding that we now know, not just as a matter of historical perspective but future climate analysis, will happen.
Underwriting to build a sustainable line of insurance
The sustainability of liability cover in the built environment is at risk as insurers can no longer shoulder the exponential cost of claims. Reinsurers have increased rates and applied more cover restrictions and exclusions, making Professional Indemnity (PI) insurance rates for the built environment more and more unaffordable, potentially leaving more professionals exposed.
Casualty insurers and brokers need to collaborate and share learnings with our professional insured clients to mitigate against this high-risk landscape. Applying better risk management measures will result in fewer claims and therefore lower premiums. Underwriting criteria must enforce better risk management to ensure not only the future sustainability of the industry, but safe, quality developments and increased economic activity.