Infrastructure assets: accidents waiting to happen?

• In many parts of the world, infrastructure assets are reaching the end of their life cycle and the liability risks associated with them are intensifying.
• The threat is most prominent in countries that have undergone a prolonged economic crisis.
• Pressure on assets is coming from new technology, urbanization, change of land use, and climate change.
• Robust project management is key to mitigating risk, particularly as infrastructure projects often involve multiple parties.

The Morandi Bridge in Genoa, Italy, was regarded as a beacon of ingenuity and innovation when it opened in 1967. Forming part of an important highway between France and Italy, the cable-stayed bridge became a local landmark, soaring over the city to cross the Polcevera River.

Its collapse in 2018 left 43 people dead. Yet years before the tragedy occurred, concerns had been raised about the structure’s integrity and maintenance record, including warnings about corrosion risk from Riccardo Morandi himself, the engineer who designed the bridge. 

Calamitous incidents like the Morandi Bridge collapse inevitably make headline news. But, increasingly, tragedies like these are no longer regarded as such isolated incidents. Around the world, infrastructure assets once heralded as modern marvels are reaching the end of their life cycle, and the liability risks associated with ageing bridges, roads, railways, tunnels, and pipelines are intensifying.

Personal injury and corporate manslaughter claims, property damage, and loss of reputation, as well as contractual disputes, could all arise from infrastructure failures. 

“The threat to infrastructure is most prominent in those countries that have been through a prolonged economic crisis,” says Mikel Arrieta, Senior Construction Liability Risk Engineer at Allianz Commercial. “During times of economic crisis, maintenance and investment expenses in capital expenditure tend to be reduced.”

Specifically, these risks are coming to light in developed countries where many infrastructure assets are over 40 years old, Arrieta explains, citing the US as one example. According to the American Road & Transportation Builders Association (ARTBA), over one third, or 220,000, of the nation’s 618,000 bridges require major work or replacement. [1] President Biden’s Bipartisan Infrastructure Law is dedicating $40bn over five years to addressing this problem. 

“The older an asset gets, the more likely failures are to occur, leading to the need for greater corrective maintenance activities and a higher risk of accident or, in extreme cases, collapse,” Arrieta continues.

“Assets can also deteriorate as technology advances and they are less able to withstand the new demands placed upon them by growing populations, increasing urbanization, and modern vehicles, which are heavier and faster. Take the loading of freight trucks, for example – the first trucks in the 20th century carried two tonnes. This year [2024], the EU has approved a permitted weight limit of 44 tonnes for articulated vehicles.” 

Container ships have also grown in size, by as much as 1,500% in the last 50 years. The Dali, which hit Baltimore’s Francis Scott Key Bridge in March (2024), was not as large as many modern vessels, but a ship of its size would still require careful navigating in restricted waters. Back in the 1970s, when the Francis Scott Key Bridge was built, container ships would have been less than half its size. [2]

Poorly maintained roads are also a recognized threat. According to the coordinating prosecutor for road safety in Spain, 30% of road accidents in the country in 2022 were due to poor road conditions. [3] 

When the inadequate maintenance of infrastructure combines with an inherent design weakness, the results can be catastrophic. In 2021 an overpass on the Mexico City subway system carrying Line 12 collapsed, claiming the lives of 26 passengers. DNV, the company tasked with carrying out an investigation into the incident, highlighted factors responsible [4], including error in construction supervision, construction error (improper installation of bolts [5]), and lack of maintenance and inspections.

One of the construction companies involved in building that part of the metro, CICSA, has reached compensation agreements with many of the victims in exchange for no further lawsuits or legal claims being made against it in future. [6] 

“There are many complexities inherent to large infrastructure projects,” says Oliver Lauxmann, Global Practice Group Leader, Chief Underwriting Office – Liability, at Allianz Commercial. “Lines of responsibility are not always clearly delineated in projects that involve designers, construction businesses, owner-operators, governments, maintenance contractors, and certification consultants. New flagship projects tend to be launched amid much fanfare, but when costs are tight, often fewer resources are devoted to maintaining or upgrading existing infrastructure, beyond what is required by local regulations. In some cases, these regulations could date back to a time of different safety expectations, usages, and technologies.

“A skilled workforce is required to maintain and monitor these older assets,” Lauxmann adds. “Such expertise might not be readily available.” 

Climate change is also bringing pressure to bear on the railways, says Vosper. “We are experiencing higher winds and more intense storms, heightening hazards such as trees falling on to tracks, or into the overhead wires and cables on electrified lines. If the maintenance of forested areas close to a railway line is neglected, it could have serious consequences in a storm. With increasing urbanization, more people and structures are now at risk from this kind of event.”

Vosper recalls an unusual climate-related claim from a client that produces glue for train windows. “The trains were traveling long distances between the Nordic region and southern Europe. With a greater disparity between the temperatures, the glue was no longer stable, so the windows became unsafe.”

Climate change is also thought to be intensifying wildfire risks, along with increasing urbanization and land use changes. The American utility giant Pacific Gas and Electric Company (PG&E) plans to bury 10,000 miles of powerlines in its highest fire-risk areas over the next decade, a process known as ‘undergrounding’, which can eliminate nearly 98% of the risk of wildfire ignition from electrical equipment. [7] PG&E filed for bankruptcy protection in 2019 after it faced more than $30bn in damages for a series of wildfires in California that were blamed on its equipment. [8]

“Measures such as undergrounding might not necessarily be a legal requirement, but they are an illustration of what a difference certain mitigation measures can make,” says Lauxmann. “Mitigation, monitoring and maintenance all require resources and investment. But unfortunately, the short-term economic interests of private companies sometimes act against the conservation of the assets they manage.” 

Lauxmann points to the collapse of the Rana Plaza industrial building in Bangladesh in 2013 as an acute example of this. Warnings to evacuate the eight-story building after cracks were discovered went unheeded by garment factory owners. The building collapsed and killed 1,134 people.

The debate surrounding infrastructure and the required investments for this has been ramping up globally, Lauxmann notes. Certain countries are implementing major policies to address infrastructure issues, including President Biden’s $1trn infrastructure bill in the US. In South Korea, the 2020-2025 Master Plan is a nationwide policy of systematic maintenance and management of infrastructure and improvement of performance; China launched a nationwide drive in 2021 to retrofit ageing highway bridges to improve safety and durability; and Germany is retrofitting and modernizing its network of bridges, which consists of about 5,200 structures largely corresponding to the Trans-European Transport Network. [9] In September 2023 the German transport minister, Volker Wissing, announced an additional €40bn ($43bn) would be spent on the country’s railway network, saying, “The rail infrastructure has been neglected for decades and brought to its absolute limits.” [10]

Arrieta believes that the ageing of infrastructure points to a future increase in claims and possible lawsuits against the parties involved in the asset, whether that’s designer, constructor, owner-operator, or maintenance company. Claims could be filed by a user who suffers material or personal damage caused by the poor state of the infrastructure, or by an owner who takes action against a company involved because of an error in the design or construction that led to the asset’s deterioration.

“We see a maintenance backlog in almost every country for infrastructure assets,” says Arrieta. “Often a problem only gets addressed if something happens, and then it might only get patched, but patching isn’t always adequate, either for long-term integrity or to comply with regulations.” 

Excellent project management is the starting point for mitigating companies’ exposure to risk, according to Vosper. “Identifying the particular risks you face is a prerequisite, and this can be done with the support of Allianz Risk Consulting engineers, who can help you navigate the regulatory landscape, understand your duty of care, and make recommendations to improve the maintenance and management of assets.”

With complex projects involving multiple parties, there will be several interfaces where various contractors intersect. This calls for precise contractual language, Vosper cautions, particularly concerning handovers, which will require clearly defined timelines, obligations, and liabilities. You will also need a thorough understanding of your supply chain, which should include the competency and experience of the various parties involved and the quality of materials that will be used. 

Lauxmann points to the march of technology as an increasingly important tool in monitoring and maintenance. “Infrastructure around the world might be ageing, but technological tools such as drones can now access hard-to-reach parts of assets to take high-res images and capture data for better-informed decision-making or reporting,” says Lauxmann. “The Tokyo Metropolitan Expressway, for example, has developed a special data collection vehicle equipped with a camera and laser scanner. This collects information for analysis by an Artificial Intelligence system that reviews the structures’ deformation over time.”

Lauxmann adds: “We know that infrastructure projects are immensely complex and face evolving challenges. Fortunately, major incidents concerning infrastructure are rare, but they are severity driven. So, if something does go wrong, there can be multiple parties involved, and severe losses can be incurred – not only in financial and reputational terms, but in the cost to human life. We are keen to maintain an ongoing risk dialogue between our clients and our risk engineers, so we can share knowledge about the evolution of liability exposures going forward, exchange technical know-how about potential solutions, and provide bespoke underwriting expertise.” 

This article is taken from the latest edition of Allianz Commercial's biannual client publication, Global Risk Dialogue, which features a number of insights on risk management and insurance topics around the world.

• Find out more about liability insurance solutions here.
  
• Find out more about Allianz Risk Consulting services here.