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השפעת מלחמת חרבות ברזל על עהף הביטוח copy.webp

The impact of the Gaza War on the construction industry in Israel

By: Itzick Simon

The construction industry in Israel has been in turmoil since the start of the war. In this short article we will touch on some the main issues affecting the construction insurance sector in particular.

It should be pointed out that the war has had an impact on all sectors of insurance in Israel, not only Contractors All Risks, but also Products Liability and Professional Indemnity and other classes of insurance. There is a sense that overseas reinsurers are often reluctant to write business in Israel due to the current situation and prefer to reduce their exposure to the Israeli market and reconsider their involvement for the time being.



Back in November last year, a month after the tragic events of 7th October, international reinsurers started asking private credit insurance companies in Israel to reduce capacity for the commercial activity of Israeli suppliers. This request was discussed in the Knesset due to a sudden and sharp increase in premiums in this class of business since the start of the war.

A month later, in December 2023, the life insurance sector was also affected. Israeli insurance companies who traditionally renew their reinsurance treaties on 1st January were told to prepare to exclude cover for war risks due to the perceived risk of a mass casualty event.

What is going on in the construction insurance sector? The market trend due to the war is merely exacerbated by the premium increases and restrictions to cover for Contractors All Risks insurance that started back in 2019.

The manpower shortage and challenges on Contractors All Risks insurance 

One of the main factors affecting the construction industry in Israel due to the war is a manpower shortage crisis. Until the war broke out, the construction industry relied on more than 100,000 workers from the Palestinian Authority (an estimated 20% of whom were illegal).

Since 7th October, this source of manpower has completely dried up and the future outlook is unclear. For example, contractors from Maaleh Ephraim are petitioning the local authority to resume work permits for Palestinians. Despite the situation, the central government has yet to supply an alternative source of labour or foreign workers, despite numerous promises to take concrete steps to do so.

The manpower shortage leads to delays in completing construction projects, thereby increasing the exposure to insurance claims and resulting in increased premiums.


The manpower crisis is one of the main factors contributing to delays in completing projects, and the ramifications on Contractors All Risks insurance policies should be considered carefully. It is not possible to “freeze” such policies and there is no such term in insurance terminology.

On one hand, the policy is limited by time and on the other hand it cannot be “frozen” due to the war, even if the construction site is closed due to rocket attacks or if labourers from the Palestinian Authority are not coming to work.

Furthermore, if the works are suspended for a period of more than 90 days, the cover is invalidated and in such a case it is essential to contact the insurer and obtain their agreement to continue the cover, agreement which will be subject to an additional premium and demands to improve protections. In other words, not only can the cover not be “frozen” but the insured is dependent on the willingness of the insurance company to continue the cover, at least for third party damages.


Can Contractors All Risks policies be “frozen”?

Is there any other solution?

If the actual works have not yet commenced and the future of the project is unclear, it might well be advisable to put off arranging Contractors All Risks insurance until the situation changes.

However, if the works have already started, even if they are at a very preliminary stage of earthworks, there really is no option but to negotiate ongoing cover with the insurance company. A construction site is a hazardous place by definition, even if it not being worked on actively. Further information on this matter can be found in the article by engineer and insurance agent Omri Nissani – “How a construction engineer who joined forces with us gives us a competitive edge in the market”.


The international reinsurance market has a direct impact on all classes of insurance in Israel, and on Contractors All Risks insurance in particular. Even before the war, and even before the pandemic, many reinsurers started limiting capacity for construction insurance in Israel.

The construction insurance market started hardening back in 2019 due an increase in global insurance claims and the Israeli has been suffering a major blow since then, partly connected to global trends, and partly due to specific local circumstances. One of the main reasons why the construction insurance market in Israel is considered less attractive is the sharp increase in claims for work accidents at construction sites, coupled with a change in law that enables the National Insurance Institute to recover disability benefits from the insurance companies by way of subrogation claims.



The attitude of international reinsurers to the construction industry in a war zone

To add injury to insult, reinsurers are increasingly concerned by delays in completing construction projects and the ensuing prolongation of their exposure to claims. Many developers and contractors are finding it very difficult to arrange insurance for new projects or to obtain agreement to extend the period of insurance for existing projects within a reasonable time (an article on this matter can be found here).

In certain cases, contractors and developers sometimes cannot find any insurance company that is willing to cover complex and high-risk projects.

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