Shutdown of the construction industry and inevitable delays to timetables
One of the first and immediate impacts of the war is the abrupt and unprecedented shutdown of the construction industry.
Almost all local authorities have completely prohibited construction works, both due to lack of adequate protections against rocket attacks to construction sites, as well in an attempt to prevent labourers – legal or illegal – from the West Bank and the Gaza Strip from entering construction sites.
This current status of the construction industry is part and parcel of the complete closure of the West Bank imposed on 8th October, which prevents the entry of 80,000 Palestinian labourers into Israel. Furthermore, planning and construction committees are not convening during this period.
The economic losses are colossal. Only recently did the construction industry sustain a loss estimated to be NIS 250-300 million as a result of the last round of clashes with Gaza in May 2023 (“Operation Shield and Arrow”) which lasted only five days.
According to data from the Israel Builders Association, each day of the conflict costs the construction industry between NIS 50-70 million. The May conflict mainly affected construction sites in the Gaza envelope area, and in other areas the shutdown only affected crane operators, due to the difficult in reaching a shelter within 90 seconds. We are now experiencing an almost complete shutdown of the nationwide construction industry.
Delays to project timetables. One of the biggest concerns facing many contractors and developers is that their projects will be delayed beyond the expiry of the period of insurance. This problem is exacerbated by the current situation in the Contractors All Risks industry in Israel regardless of the war, which is impacted by global trends.
The current hard market conditions in the global reinsurance industry makes the process of extending the period of insurance under a Contractors All Risks policy all the more difficult. Even before the war, the insurance companies did not automatically agree to extend policies as they usually did in the past and in many cases they imposed very onerous conditions or refused outright. We recently uploaded an article to our site on this very matter.
Important points to bear in mind:
Don’t wait until the last minute – The insurance companies are inundated with enquiries during this period. Don’t wait until your policy is about to expire. Contact your insurance agent at least six months in advance and make sure that your request to extend the period of insurance contains reasoned and logical explanations, supported by relevant documentation where necessary.
Silence does not signal acceptance –The very fact that you have applied for an extension is not a foregone conclusion. The extension only takes effect after the insurance company has explicit confirmed it, and not a moment before.
Don’t operate a construction site without a valid insurance policy – If your policy has already expired, you are well advised to suspend work at the construction. The saying that “Anything that can go wrong will go wrong”, aka Murphy’s Law, is particularly relevant for construction sites.