Parametric Can Help Mitigate Extreme Heat Risks for Contractors in EMEA

Construction projects in EMEA are often impacted by extreme heat, leading to project delays and increased costs. Many heat exposures are excluded by traditional markets, however, parametric is a flexible solution that can help mitigate these risks.
Key Takeaways
-
As climate change continues to impact EMEA temperatures, construction project delays and increased costs will remain issues for contractors and building owners.
-
During extreme heatwaves, projects involving physical labor take 36 percent longer on average to complete.
-
Parametric insurance is critical to construction risk strategies because of its broad scope, flexibility, and fast and transparent claim settlements.
Extreme heatwaves, fueled by climate change, represent one of the most pressing challenges for the construction industry in Europe, the Middle East and Africa (EMEA).
The most devastating impact is on human health and life, with heat-related deaths surpassing those of any other weather-related danger. This is accompanied by significant indirect health issues, such as respiratory failure, cardiovascular disease and heat stroke.
Like other parts of the world, EMEA has experienced the dire consequences of extreme heat. Aon’s 2023 Weather, Climate and Catastrophe Report highlights two separate major heatwaves in the region in June and July of 2022. These affected hundreds of millions of people, leading to nearly 20,000 heat-related fatalities, as derived from excess mortality rate data.
From a business standpoint, extreme heat creates widespread issues, affecting operations, productivity and employee wellbeing. When temperatures reach unsafe levels for workers, the construction process is delayed, and subsequently, costs rise.
In fact, during extreme heatwaves, construction projects involving physical labor take 36 percent longer on average to execute. This will only grow more severe, as climate change continues to impact temperatures and the average age of the construction workforce continues to rise (from 40.5 in 2015 to 42.5 in 2022).1
In most countries around the world, however, legislation is not specific about what is considered an acceptable range for temperature conditions at work, especially outdoors. Only sometimes does national legislation provide a range of acceptable temperatures for specific circumstances.2
The majority of European countries, too, have no legal maximum working temperatures or heat protection regulations (although most include labor laws requiring workers to be comfortable or safe).
Here is a snapshot of extreme heat labor laws in select EMEA countries:
-
France
- There is no set maximum temperature to work in; employers must ensure safe conditions.
-
Germany
- Employers are required to ensure workers can proceed safely with their activities when temperatures exceed 26 degrees Celsius and provide drinkable water at 30 degrees Celsius.
-
Italy
- There is no set maximum temperature to work in; workers can halt work if conditions are unsafe.
-
Portugal
- Workplace temperatures must be 18-22 degrees Celsius, with humidity at 50-70 percent.
-
Spain
- Work that requires light physical effort should be performed in temperatures between 14 and 25 degrees Celsius.
-
UK
- Like many European governments, the UK has no maximum working temperature provisions.
- In 2022, the General, Municipal, Boilermakers' and Allied Trade Union, which represents workers from a range of sectors, called on the government to introduce “too hot to work” legislation at 27 degrees Celsius for those doing strenuous jobs. It also requires employers to provide sun protection and water.
-
United Arab Emirates
- The UAE prohibits employers from forcing employees to work outdoors between 12:30 and 3 p.m., from June 15 to September 15, which is the hottest time of day.
Parametric insurance allows clients to access alternative capital to enable the transfer of a whole myriad of measurable exposures not met by the traditional insurance market.
Unlike acute perils, the full impact of chronic perils, like extreme heat, are often cumulative and difficult to measure, leaving a potential protection gap. While traditional insurance markets address physical damage, the economic implications faced by clients, including business interruption and loss of employee income, are often more substantial.
How Parametric Solutions Can Help
Parametric insurance is complementary to traditional insurance solutions. It can be used in situations like extreme heat, where a risk must be mitigated and may not be covered via traditional markets.
Unlike traditional insurance, parametric coverage is triggered by predefined parameters, providing quicker and more transparent claim settlements. With its flexibility and broad scope, parametric insurance helps bridge the protection gap, making it an ideal alternative risk transfer solution in catastrophe-prone areas — and in areas where extreme heat is an issue.
“Parametric insurance allows clients to access alternative capital to enable the transfer of a whole myriad of measurable exposures not met by the traditional insurance market.” says Jon Chapman, head of Aon’s construction and infrastructure practice in EMEA. “It creates an avenue for additional capacity for issues that are not covered by traditional insurers and another source for clients to address volatility.”
Parametric takes an “if-then” approach. As more risk managers rethink their risk resilience, this method complements and supplements traditional insurance, paving the way for an innovative and transformative, yet straightforward solution, perfectly suited for catastrophic events.
Here’s how the core mechanics of parametric insurance work:
- The “if:” Parametric insurance stands out due to its coverage trigger and pre-agreed payouts. Underwriting is simplified as coverage is activated by the occurrence of an independent event, as determined by neutral third-party data providers.
- The “then:” With the independent data trigger and pre-agreed amounts, recoveries occur swiftly — often within days or weeks of an event. This quick access to capital is critical for businesses that need immediate financial assistance following an event.
- Solving the protection gap: Parametric insurance offers broad coverage, ensuring that any economic exposure arising from an event can be insured. Previously uninsurable exposures become insurable, with the parametric trigger acting as the missing link to unlock flexible capital.
Parametric Benefits for Construction Stakeholders
For Contractors | For Building Owners |
---|---|
Reduces contingencies in contract prices |
Mitigates income loss from delays to commercial operations dates |
Enables worker wellbeing |
Enables worker wellbeing |
Facilitates access to capital — Parametric may cover additional costs to help keep projects on schedule |
Facilitates access to capital — Parametric may cover additional costs to help keep projects on schedule |
Includes possible liquidated damages for delays and associated expenses |
Ensures debt service is met in case of Cost of Delay (CoD) delay |
3 Ways to Take Action
The escalating risks posed by extreme heat in the construction industry demand proactive and innovative risk management strategies. To adapt and thrive through these heat-related challenges, it's crucial for construction companies to act now. Start by following these three steps:
-
1. Use forward-looking data and analytics
This includes weather data and heat tracking tools to understand the projected impacts of extreme heat on the business and its employees. By gaining insights into future risks, including temperature trends, heat indices, humidity levels and other environmental factors, firms can proactively implement preventive measures to safeguard operations and ensure the wellbeing of their workforce.3
-
2. Prioritize workforce health and wellbeing
Implement measures to reduce heat-related health risks. Create a heat illness prevention strategy that plans ahead to protect workers, and encourages water, rest and shade.4
-
3. Collaborate with experienced brokers and explore alternative solutions
Ensure brokers specialize in mitigating risks in the construction industry and consider alternative solutions like parametric insurance. By partnering with knowledgeable professionals, companies can tailor their risk management strategies to their specific needs, enhancing resilience to extreme heat events.
General Disclaimer
This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.
Terms of Use
The contents herein may not be reproduced, reused, reprinted or redistributed without the expressed written consent of Aon, unless otherwise authorized by Aon. To use information contained herein, please write to our team.
Aon's Better Being Podcast
Our Better Being podcast series, hosted by Aon Chief Wellbeing Officer Rachel Fellowes, explores wellbeing strategies and resilience. This season we cover human sustainability, kindness in the workplace, how to measure wellbeing, managing grief and more.
Aon Insights Series Asia
Expert Views on Today's Risk Capital and Human Capital Issues
Aon Insights Series Pacific
Expert Views on Today's Risk Capital and Human Capital Issues
Aon Insights Series UK
Expert Views on Today's Risk Capital and Human Capital Issues
Construction and Infrastructure
The construction industry is under pressure from interconnected risks and notable macroeconomic developments. Learn how your organization can benefit from construction insurance and risk management.
Cyber Labs
Stay in the loop on today's most pressing cyber security matters.
Cyber Resilience
Our Cyber Resilience collection gives you access to Aon’s latest insights on the evolving landscape of cyber threats and risk mitigation measures. Reach out to our experts to discuss how to make the right decisions to strengthen your organization’s cyber resilience.
Employee Wellbeing
Our Employee Wellbeing collection gives you access to the latest insights from Aon's human capital team. You can also reach out to the team at any time for assistance with your employee wellbeing needs.
Environmental, Social and Governance Insights
Explore Aon's latest environmental social and governance (ESG) insights.
Q4 2023 Global Insurance Market Insights
Our Global Insurance Market Insights highlight insurance market trends across pricing, capacity, underwriting, limits, deductibles and coverages.
Regional Results
How do the top risks on business leaders’ minds differ by region and how can these risks be mitigated? Explore the regional results to learn more.
Human Capital Analytics
Our Human Capital Analytics collection gives you access to the latest insights from Aon's human capital team. Contact us to learn how Aon’s analytics capabilities helps organizations make better workforce decisions.
Insights for HR
Explore our hand-picked insights for human resources professionals.
Workforce
Our Workforce Collection provides access to the latest insights from Aon’s Human Capital team on topics ranging from health and benefits, retirement and talent practices. You can reach out to our team at any time to learn how we can help address emerging workforce challenges.
Mergers and Acquisitions
Our Mergers and Acquisitions (M&A) collection gives you access to the latest insights from Aon's thought leaders to help dealmakers make better decisions. Explore our latest insights and reach out to the team at any time for assistance with transaction challenges and opportunities.
Navigating Volatility
How do businesses navigate their way through new forms of volatility and make decisions that protect and grow their organizations?
Parametric Insurance
Our Parametric Insurance Collection provides ways your organization can benefit from this simple, straightforward and fast-paying risk transfer solution. Reach out to learn how we can help you make better decisions to manage your catastrophe exposures and near-term volatility.
Pay Transparency and Equity
Our Pay Transparency and Equity collection gives you access to the latest insights from Aon's human capital team on topics ranging from pay equity to diversity, equity and inclusion. Contact us to learn how we can help your organization address these issues.
Property Risk Management
Forecasters are predicting an extremely active 2024 Atlantic hurricane season. Take measures to build resilience to mitigate risk for hurricane-prone properties.
Technology
Our Technology Collection provides access to the latest insights from Aon's thought leaders on navigating the evolving risks and opportunities of technology. Reach out to the team to learn how we can help you use technology to make better decisions for the future.
Top 10 Global Risks
Trade, technology, weather and workforce stability are the central forces in today’s risk landscape.
Trade
Our Trade Collection gives you access to the latest insights from Aon's thought leaders on navigating the evolving risks and opportunities for international business. Reach out to our team to understand how to make better decisions around macro trends and why they matter to businesses.
Weather
With a changing climate, organizations in all sectors will need to protect their people and physical assets, reduce their carbon footprint, and invest in new solutions to thrive. Our Weather Collection provides you with critical insights to be prepared.
Workforce Resilience
Our Workforce Resilience collection gives you access to the latest insights from Aon's Human Capital team. You can reach out to the team at any time for questions about how we can assess gaps and help build a more resilience workforce.
More Like This
-
Article 22 mins
The AI Data Center Boom: Strategies for Sustainable Growth and Risk Management
Rapid growth in data center construction, spurred by AI advancements and cloud demand, creates interconnected risks for developers. However, with effective risk management solutions, navigating this dynamic market while prioritizing sustainability is possible.
-
Article 9 mins
Employer Strategies for Cancer Prevention and Treatment
Nearly 20 million people get cancer each year,<sup>1</sup> and the impact is far-reaching — from those diagnosed to their loved ones and colleagues. When developing a meaningful cancer prevention strategy, employers must show empathy and compassion while managing rising costs.
-
Article 8 mins
Mitigating Volatility and Maximizing Profits: A Guide to Risk Capital in the Food, Agribusiness and Beverage Industry
In an industry with tight operating margins, FAB organizations face significant challenges in managing spend and protecting their financial health — requiring industry leaders to adopt a sophisticated approach to risk capital optimization.
-
Article 15 mins
5 Top Trends for Risk Capital in 2025
The risk capital landscape is poised for change, driven by emerging trends reshaping market dynamics. With a buyer-friendly market currently prevailing across most lines, opportunities abound for strategic investment and risk management.
-
Article 9 mins
3 Strategies to Help Avoid Workers Compensation Claims Litigation
When a workers compensation claim goes to litigation, expenses rise dramatically — a burden that is often shouldered by the business. To mitigate attorney-related costs, organizations should re-think their approach to engaging injured workers and use artificial intelligence to enhance outcomes.
-
Article 35 mins
5 Human Resources Trends to Watch in 2025
Human resources is increasingly involved in all areas of a company’s strategy. As the workforce changes, HR leaders should identify and leverage these five important and evolving trends.
-
Article 6 mins
The Long-Term Care Conundrum in the United States
Long-term care is expensive, and costs are rising due to shortages. With the population aging at the fastest rate in a century, finding solutions to pay for care is an urgent priority. How can employers support this growing population?
-
Article 6 mins
Improving Benefit Communication for a Multi-Generational U.S. Workforce
With a multi-generational and diverse workforce, it is important for employers to develop benefit communications and engagement strategies to help employees understand their unique benefit options. Here are five useful tips to consider.
-
Article 13 mins
Medical Rate Trends and Mitigation Strategies Across the Globe
Rising medical costs are a global phenomenon. Aon’s 2025 Global Medical Trend Rate Survey found that costs are projected to rise 10 percent in 2025.
-
Article 7 mins
Key Trends in U.S. Benefits for 2025 and Beyond
As healthcare costs continue to rise, employers are trying to balance the need to take care of their workers with the need to keep costs under control. Aon’s 2025 U.S. Health Survey provides insights into the choices employers are making, and their potential effects on costs.
-
Article 9 mins
Pension Reform: Navigating the Future of Retirement
Pension reforms in Europe are reshaping retirement planning, demanding more oversight from employers and new strategies for employees’ financial wellbeing.
-
Article 6 mins
Managing Non-Financial Risks to Build Organizational Resilience in the Financial Institutions Industry
Non-financial risks are often difficult to predict and quantify, yet present a real threat to financial institutions. In this volatile environment, risk management is playing a greater role in creating business resilience and identifying where capital should be deployed.
-
Article 9 mins
Ensuring Operational Stability Post-Spin-Off: A Conversation with Daniel Halter from Sandoz
Daniel Halter, Director Global Insurance at Sandoz, discusses how smart risk and insurance management supported the Sandoz core mission to provide affordable, off-patent medicines to patients who need them most with Ana Serdarevic, Head of Aon’s Transaction Advisory Services for DACH.
-
Article 7 mins
How to Navigate AI-Driven Cyber Risks
Business leaders are aware of AI-driven cyber risks and their implications. But understanding changing risk profiles to make better decisions around the management of new exposures is the key to cyber resilience.
-
Article 8 mins
U.S. Rail Sectors Work to Mitigate Capacity and Pricing Risk Issues
U.S. freight and commuter rail industries are facing excess liability and property issues for different reasons. These railroads are critical to infrastructure and vital to the economy, yet finding effective solutions remains complex.
-
Article 11 mins
D&O Risks and Considerations for Businesses Planning an IPO
As private companies prepare for an IPO, they face increased risks that require directors and key leaders to adopt essential risk management strategies to ensure a smooth transition.
-
Article 10 mins
How Public Entities and Businesses Can Use Parametric for Emergency Funding
As climate change intensifies the frequency and severity of extreme weather events, public entities and businesses need more flexible funding solutions. Parametric stands out as an adaptable resource capable of swiftly responding to potential disasters.
-
Article 17 mins
How Insurance Helps Unlock Capital for Hydrogen Projects Amid Financing Pressures
Funding challenges due to macroeconomic factors have prevented several green and blue hydrogen projects from getting off the ground. Organizations facing hurdles in accessing capital can work with risk and insurance experts to expedite projects and help make the promise of hydrogen a reality.
-
Article 11 mins
Strengthening Human Capital Strategies to Attract Talent in the Food, Agribusiness and Beverage Industry
Learn how strong human capital strategies can help recruit, retain and motivate vital talent in a competitive and evolving job market.
-
Article 7 mins
Trends U.S. Corporate Boards Should Prepare for in 2025
As corporate boards meet to discuss strategy, including any changes to executive compensation, there are key trends to consider for the year ahead.
-
Article 6 mins
Leading the Biofuels Transition: Risk Strategies to Cut Through Complexity
Companies aiming to be a net-zero company may face many challenges during the biofuels transition. Read more on risk strategies to cut through complexity.
-
Article 6 mins
DC Pension Schemes: Improving Investment Returns
With DC schemes growing across Europe, many organizations are realizing the importance of ensuring strong performance from their investments. Here’s how asset owners and managers can optimize DC outcomes through the right investment strategy.
-
Article 9 mins
Developing a Paid Leave Strategy That Supports Workers and Their Families
With no federal paid leave law in the U.S., employers have limited guidance in designing equitable and comprehensive paid leave programs to support their workforce. Looking beyond compliance to focus on strategy and values will help create fair and well-designed policies.
-
Article 8 mins
Unlock the Potential of Alternative Risk Transfer Solutions
Risk managers are increasingly looking to Alternative Risk Transfer Solutions for potential enhancements in managing risk.
-
Article 8 mins
2025 Salary Increase Planning Tips
Amid economic uncertainty, companies are taking a careful approach to hiring and salary planning — one that includes focused hiring strategies, revising salary budgets and implementing measures that respond to the current economic environment.
-
Alert 7 mins
Client Alert: Responding to Heightened Risk in the Middle East
The current operating environment in the Middle East is increasingly complex and multifaceted, characterized by ongoing conflicts in Gaza, Israel, Lebanon and neighboring states, alongside significant changes in the business and insurance environment.
-
Article 8 mins
Florida Hurricanes Not Expected to Adversely Affect Property Market
Hurricanes Helene and Milton insured loss estimates are expected to fall between $34 billion and $54 billion. Healthy, well-capitalized insurance and reinsurance markets are positioned to absorb those losses.
-
Article 17 mins
Q3 2024: Global Insurance Market Overview
Buyer-friendly conditions continued across much of the global insurance market in Q3, painting a largely positive picture as we head into year-end renewals.
-
Article 10 mins
Why It’s Key to Conduct Cyber Due Diligence in Financial Services During Mergers and Acquisitions
A successful M&A strategy relies on due diligence across financial, legal, human capital, technology, cyber security and intellectual property risks. As cyber threats become more complex, robust cyber due diligence in private equity and acquisitions is increasingly necessary.
-
Article 8 mins
The Evolving Threat of Cargo Theft: 5 Key Mitigation Strategies
Cargo theft in the transportation industry is escalating, driven by sophisticated criminal tactics that exploit both physical and digital vulnerabilities. Businesses must adopt proactive risk management strategies to counter these evolving threats.
-
Article 11 mins
4 Megatrends Affecting Middle Market Organizations in North America
Trade, technology, weather and the workforce are interconnected trends shaping the future of business in North America. Understanding them is key to long-term resilience.
-
Article 9 mins
Building Resilience in a Buyer-Friendly Cyber and E&O Market
Competition and capacity are dominating the cyber liability market and pricing remains favorable as a result. Taking advantage of the current buyer’s market to build sustained cyber resilience is the key to success.
-
Article 10 mins
How Risk Transfer Solutions Increase Capital Access in Renewable Energy M&A Deals
The growing renewable energy sector is boosting M&A activity. Risk transfer solutions can help unlock capital access in these transactions.
-
Article 7 mins
Managing Human Capital to Drive Innovation in Life Sciences
Digitalization presents both opportunities and challenges in life sciences, driving new organizational approaches to human capital to keep up with evolving talent needs while building a resilient workforce.
-
Article 5 mins
Connected Perspectives: Better Decisions on Digitalization for Financial Institutions
As financial institutions reshape human capital strategies for the digital age, leaders face pressure to balance the risks and opportunities of digitalization.
-
Article 9 mins
The Next Evolution of Wellbeing is About Performance
Employers are concerned that previous wellbeing strategies aren’t moving the needle enough. But when wellbeing is part of an organization’s culture, it has positive effects on costs, engagement and productivity.
-
Article 6 mins
How Human Capital Data Enhances Risk Management for Financial Institutions
Financial institutions can increase their resilience to volatile threats through enhanced risk management frameworks and innovative models powered by people data and technology.
-
Article 10 mins
How Financial Institutions can Prepare for Pay Transparency Legislation
As the deadline for implementing the EU Pay Transparency Directive fast approaches, some financial institutions feel unprepared to comply. These five steps can help guide the way through the upcoming regulatory landscape.
-
Article 9 mins
4 Ways to Foster a Thriving Workforce Amid Rising Health Costs
Thriving organizations rely on thriving employees to succeed. With healthcare costs on the rise, it’s time for employers to challenge the status quo in providing health benefits. Organizations need to consider the human side of these increases and take bold action to achieve better outcomes.
-
Article 9 mins
How Social Inflation is Impacting the Aviation Industry
The aviation industry is watching the rise in nuclear verdicts with concern as social inflation and associated risks continue to squeeze the sector. Organizations should review their risk management processes to limit the dollar value of future losses.
-
Article 12 mins
Navigating AI-Related Risks: A Guide for Directors and Officers
As AI evolves, directors and officers must maneuver through a complex landscape of regulatory and legal risks. Implementing best practices around the use of AI and robust governance-focused risk mitigation can help manage exposures.
-
Article 11 mins
A Middle Market Roadmap for Cyber Resilience
Middle market organizations face unique challenges in the ever-changing cyber environment, requiring holistic insurance solutions and enhanced resilience readiness to manage risks that could impact profitability.
-
Article 17 mins
3 Strategies to Improve Career Outcomes for Older Employees
With life expectancies and retirement ages on the rise, organizations can capitalize on the value that older employees offer and support them by fostering a workplace where both the business and its people thrive.
-
Article 8 mins
Wildfire Risk Fuels New Challenges for U.S. Communities
As climate change compounds wildfire risk, organizations play a critical role in protecting their workforce before and after an event.
-
Article 10 mins
5 Ways to Address Health and Wellbeing in the Transportation Industry
The transportation and logistics industry faces unique challenges which can negatively impact employees' health. A cultural shift to more tailored wellbeing strategies can improve health outcomes and boost company performance.
-
Article 8 mins
Workforce Shortages as a Future Risk
As workforce and skills shortages emerge as a significant future risk, companies seek winning talent and tech solutions.
-
Article 6 mins
A Streamlined Retirement Solution for Spin-Off Organizations
Pooled employer plans (PEPs) can offer a streamlined solution to the retirement planning challenges inherent in spin-off and M&A events.
-
Article 20 mins
5 Ways HR Can Partner with Finance to Drive Growth
The role of HR professionals is becoming more strategic, which requires collaboration with other areas of an organization to help drive growth. Given that people and benefit costs are a large portion of business expenses, partnering with finance is a natural step forward.
-
Article 5 mins
Remote Work and Potential Employment Practices Liability Perils
Aon analyzes employee perception about return to office policies following the COVID-19 pandemic, as well as recent actions one organization took for alleged lack of remote employee productivity.
-
Article 11 mins
The Silver Lining on M&A Deal Clouds: M&A Insurance Insights from 2023
Despite subdued global M&A in 2023, positive trends have been emerging in the M&A insurance market to help clients improve their deal-making and ‘value-protection on investment’.
-
Article 7 mins
Specialist Insights: A Deep Dive into Effective Crisis Management and Evacuation Protocols
Graeme Hudson and Ghonche Alavi from Crisis24 discuss Crisis24’s approach to Political Evacuation and Threat Management with Cara LaTorre from the Financial Services Group at Aon.
-