Marsh warns over higher raw materials costs

Rising cost of raw materials and commodity price volatility could lead to companies being under-insured, Marsh has warned.  

The increased costs of construction materials, such as steel, has fuelled increases in the rebuilding costs for plants and facilities, meaning that companies failing to routinely update their insured values are potentially exposed to the risk of under-insurance.

Energy firms that fail to update their insurance valuations are particularly vulnerable to sharp rises in plant inflation costs after a relatively benign period in 2009-10, according to the broker.

Marsh’s Energy Practice senior risk engineer John Munnings-Tomes said: “This year, plant construction costs for refineries and petrochemical facilities have exceeded the previous high of 2008, while costs for offshore facilities are fast approaching 2008 levels. This upward trend is showing no signs of turning, particularly in the case of continued high and relatively stable crude oil pricing.”