Civil Construction Outlook for Q3 2025: New Challenges in Obtaining All Risks Insurance

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Civil engineering in Indonesia is entering a promising growth phase in the third quarter of 2025. The government, along with the private sector, is moving quickly to accelerate strategic infrastructure projects, from toll roads and connecting roads to the new capital city (IKN), public transportation systems, to the construction of new government facilities. One project in the spotlight is the Sepaku Ring Road Phase 2 in the Indonesian capital area, which is key to strengthening connectivity to the new administrative center. Meanwhile, several major projects undertaken by state-owned construction companies are also showing remarkable progress, including the completion of a vertical hospital, government offices, and VVIP airport facilities.

Not only is the capital city (IKN) experiencing significant construction activity, but national programs are also targeting dozens of government-private partnership projects in the roads, bridges, water, and housing sectors, with investments reaching trillions of rupiah. In the toll road sector, several strategic sections, such as Gilimanuk-Mengwi, Pejagan-Cilacap, and Sentul-Karawang, are being promoted to investors through infrastructure investment forums, demonstrating the significant growth opportunities in this sector.

However, behind this optimism, significant challenges cannot be ignored. Delays in material supplies, engineering errors, extreme weather, and regulatory pressures exacerbate the risks involved in project implementation. Without thorough risk management planning, significant investments could be wasted. This is where comprehensive protection is crucial to prevent the growing momentum of civil construction from turning into losses.

This article will delve deeper into the prospects for Indonesian civil construction in the third quarter of 2025, the significant opportunities that exist, and the new challenges that must be faced, particularly regarding the need for project protection through Construction All Risks insurance.

Indonesia’s Civil Construction Outlook for Q3 2025

Entering the third quarter of 2025, Indonesia’s civil construction sector is showing increasingly strong growth. Accelerating national infrastructure development remains a key driver of economic growth. The government continues to prioritize infrastructure projects, not only to strengthen inter-regional connectivity but also as a foundation for long-term economic growth.

One of the big focuses that is attracting attention is the development project.Capital City of the Archipelago (IKN). Construction work underway in East Kalimantan is now entering its next phase, with the construction of ring roads, bridges, and major government buildings. The new capital city (IKN) is not only a symbolic project but also a magnet for new investment. The project’s presence is boosting the civil engineering sector, from housing development and healthcare facilities to transportation infrastructure supporting the region.

Besides IKNThe toll road sector is also continuing to experience rapid growth. Several strategic national projects, such as the Gilimanuk–Mengwi Toll Road in Bali, the Sentul–Karawang Toll Road in West Java, and the Pejagan–Cilacap Toll Road in Central Java, are currently underway. These projects are expected to accelerate logistics distribution and open new centers of economic growth in the surrounding areas.

Equally important, the civil construction sector is also being strengthened by the construction of healthcare, education, and other public facilities as part of the government-to-business partnership (KPBU) program. Through this scheme, dozens of projects are being offered to investors, with an estimated investment value of trillions of rupiah. This demonstrates that civil construction remains a strategic sector attracting interest from both local and international investors.

In addition, the development trend of renewable energy facilities also contributes to the civil construction sector. New solar power projects, wind power projects, and transmission networks require robust civil infrastructure. With Indonesia’s target of achieving a 23% clean energy mix by 2025, the civil construction sector will play a vital role in supporting the energy transition.

This bright outlook is also reflected in the growing confidence of investors and contractors in undertaking large-scale projects. However, these significant opportunities always come with significant risks. The more complex the project, the greater the challenges, both technically and financially.

With dynamics like these, the civil construction sector in Indonesia is not only a golden opportunity, but also a real test for contractors, developers, and related service providers to be able to adapt and manage risks appropriately.

New Challenges in Civil Construction and Their Impact on Project Protection

Behind the optimism for growth in Indonesia’s civil construction sector in the third quarter of 2025, there are a number of significant challenges that cannot be ignored. The increasingly complex development landscape demands greater vigilance and adaptability in the industry. These challenges arise not only from technical factors in the field but also from global dynamics, regulatory changes, and technological developments.

One of the most obvious challenges is material and logistics delays. Large-scale infrastructure projects such as IKN, toll roads, and other public facilities require large, timely supplies of materials. Distribution disruptions due to extreme weather, global geopolitical conditions, or limited port capacity can cause significant delays. These delays often result in significant additional costs and, in some cases, can lead to contract disputes.

Besides that, climate uncertainty and extreme weather is becoming a new and increasingly relevant challenge. Indonesia is increasingly experiencing heavy rainfall, flooding, and landslides, which can hinder construction progress. These conditions not only disrupt project schedules but also increase the risk of physical damage to structures under construction. For contractors, losses due to unpredictable weather are often difficult to recover from without a robust protection strategy.

Another challenge that is no less serious is design errors and technical risksThe complexity of large projects such as high-rise buildings, long bridges, and renewable energy facilities demands high precision. Small errors in technical calculations can have significant consequences, both in terms of cost and safety. Cracks, structural failures, and workplace accidents remain real risks plaguing the construction sector.

From a regulatory perspective, construction projects in Indonesia are now faced with increasingly stringent legal standards and oversight. The licensing process, environmental requirements, and compliance with occupational safety standards are increasingly complex. While these regulations are well-intentioned, they aim to ensure project quality and safety. However, even the slightest administrative delay or non-compliance can result in sanctions that impact project sustainability.

No less important,funding challenges are also in the spotlight. With the investment value of construction projects continuing to rise, the need for financing from banks and investors is crucial. Global economic fluctuations, rising interest rates, and domestic fiscal policies can impact capital availability. If funding flows are disrupted, project progress is at risk of being slowed.

Lastly, the development digital construction technologyTechnologies such as Building Information Modeling (BIM) and the Internet of Things (IoT) offer significant opportunities, but also introduce new risks. Project data leaks, digital system disruptions, or technology integration errors can result in additional costs and a construction company’s reputation.

All of these challenges ultimately emphasize one thing: modern civil construction projects in Indonesia increasingly require a well-thought-out risk management strategy. Protecting projects through construction insurance is no longer an optional option, but a fundamental necessity to ensure every dollar of investment is protected.

New Challenges in Obtaining Construction All Risks (CAR) Insurance

As infrastructure development activity in Indonesia increases, particularly on major projects such as the Indonesian Capital City (IKN), new toll roads, ports, and renewable energy facilities, demand for Construction All Risks (CAR) policies has also seen a significant surge. This policy is a crucial instrument that provides comprehensive protection against risks that can affect construction projects, both from the physical work itself and third parties. However, the reality on the ground shows that obtaining CAR insurance coverage is not as easy as it once was. Contractors, project owners, and insurers now face a number of new challenges.

First, the increasing scale and complexity of projectsThis has made underwriters more cautious in assessing risk. Projects worth trillions of rupiah, such as the development of the core area of ​​the new capital city (IKN), require in-depth technical analysis. Factors such as the project’s location, which still lacks supporting infrastructure, potential geotechnical risks, and extreme weather conditions in East Kalimantan are serious concerns for insurance companies. Consequently, the underwriting process is lengthier, requiring more detailed technical documentation and additional requirements such as engineering surveys.

Second, increase in large claims in the construction sectorThe recent economic downturn has also impacted insurance companies’ attitudes. Several bridge collapses, fires during construction, and occupational safety incidents resulting in fatalities have forced insurance companies to tighten their capacity. International reinsurers have even raised risk assessment standards, directly impacting premiums and reducing coverage limits in Indonesia.

Third, financial challenges from the contractor’s sideEqually significant is the need for liquidity to run projects, but not all contractors have sufficient cash flow to cover premium payments all at once. This situation often leads to negotiations between contractors, brokers, and insurance companies to find a more flexible payment scheme.

Fourth, regulatory and compliance issues is also a crucial factor. The government is currently promoting Occupational Safety and Health (K3) standards and the implementation of green construction. Insurance companies require strict adherence to these standards as a prerequisite for issuing a policy. If a contractor company is deemed negligent in documentation or risk management, the CAR policy may be rejected or subject to additional exclusions.

These challenges demonstrate that the new era of infrastructure development in Indonesia also brings consequences for construction risk management. Contractors and project owners can no longer take insurance lightly. A strategy, the right partners, and more thorough document preparation and risk management are required to ensure CAR protection remains accessible at competitive prices and provides optimal protection.

Strategies for Facing Challenges and the Role of Insurance Brokers

Amidst increasingly stringent requirements and complexity in obtaining a policy Construction All Risks (CAR) Contractors, project owners, and investors can no longer focus solely on the technical aspects of construction. A well-planned risk management strategy is key to a smooth insurance application process and to ensuring the coverage truly meets the project’s needs.

One of the main strategies is to prepare complete technical and administrative documents from the startUnderwriters now assess not only the project value but also the detailed engineering design, implementation methods, geotechnical reports, and field safety plans. Contractors who can provide comprehensive technical data will be more trusted by insurance companies, simplifying premium negotiations and policy terms.

In addition, construction companies need to improve safety management (K3) standards and risk monitoring at project sitesThe implementation of modern safety protocols, workforce training, and the use of equipment that meets international standards will add value to risk assessments. Insurance companies often offer incentives in the form of more competitive premiums to contractors with a good safety track record.

However, the biggest challenge lies in the communication process with insurance and reinsurance companiesNot all contractors have the experience, network, or time to conduct detailed negotiations with underwriters, especially when it comes to large-scale projects or projects involving international parties. This is where the role of a consultant comes in.insurance broker becomes crucial. Brokers serve as a liaison who understands the contractor’s interests and speaks the technical language of insurance, thus bridging the client’s needs with the insurer’s requirements.

Experienced brokers like L&G Insurance Broker, for example, can help contractors:

• Prepare an attractive risk proposal that meets underwriter standards.
• Compare offers from different insurance companies to get the best premium.
• Provide recommendations for risk management strategies so that policies are approved with optimal conditions.
• Assist in the claims process if the risk actually occurs in the field.

With the support of a broker, contractors don’t have to navigate the complexities of the insurance market alone. A broker’s role is not merely as an intermediary, but as strategic partners in ensuring the sustainability of construction projects.

Ultimately, the strategy for addressing CAR insurance challenges depends not only on the contractor’s financial strength, but also on the extent to which they are able to proactively manage risks and select the right partners to accompany them at every stage of construction.

Conclusion and Recommendations

The prospects for civil construction in Indonesia in the third quarter of 2025 are very bright, supported by developmentCapital City of the Archipelago (IKN), national-scale infrastructure projects, and a private sector that is increasingly confident in economic growth. However, behind these significant opportunities, serious challenges arise.risk protection.

Insurance Construction All Risks (CAR) Contracts are no longer just a formality, but an absolute requirement for smooth project execution and full support from investors, banks, and other stakeholders. Strict selection processes from insurance companies, the need for comprehensive technical documentation, and higher occupational safety standards require contractors to be more prepared and professional at every step.

Here the role of insurance brokers becomes crucial. Contractors can rely more than just on field experience; they also need partners who understand the dynamics of the insurance market, have extensive networks with insurers and reinsurers, and are able to negotiate the best policy terms. Brokers like L&G Insurance Broker present to ensure that every construction project is fully protected—from the tender stage, construction, to claim settlement if the risk actually occurs.

Recommendation:

1. Contractors need to prepare strong risk management from the project planning stage.
2. Technical and administrative documentation must be prepared completely and transparently.
3. Don’t face insurance companies alone. Use the services of a trusted broker.to get optimal protection with competitive premiums.
4. View insurance policies as part of a long-term business strategy., not just additional costs.

In conclusion, the golden opportunities in the construction sector can only be realized if risks are properly managed. Don’t let projects worth billions or even trillions of rupiah be jeopardized by inadequate insurance coverage.

Get in touch L&G Insurance BrokerNow, a trusted partner ready to assist you through every step of development. With us, your project will not only be solidly built but also protected from all potential risks.

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