Global water services are potentially at risk from the challenges associated with ageing assets and infrastructure as water companies struggle to balance budgetary constraints with the need for ongoing capital investment, according to a new report published this week.

In Marsh’s 2013 Water Industry Insurance and Risk Benchmarking Report, which analyses the risk and insurance trends of water companies across four continents, asset failure was ranked as the top risk facing water companies globally for the eighth consecutive year.

According to global specialist in insurance broking and risk management Marsh the average Total Cost of Risk (TCOR), which measures the performance of an organisation’s risk management and insurance programme, experienced by the global water industry rose by 10% in 2012. Attributed to challenging insurance market conditions and self-insured losses in 2012, Marsh expects the average TCOR for the global water industry to decline in 2013 as a result of a more benign insurance cycle.

Simon Gaunt, Managing Principal in the Global Power and Utilities Practice at Marsh, commented:

“Asset upgrades are required globally to replace ageing systems, in order to manage the risks associated with extreme weather events more effectively and to deliver on community expectations of a secure and sustainable water supply. However, challenging economic conditions, especially in those territories that are dependent on government funding, are continuing to constrain the ability of water companies to fund infrastructure projects.

“In the absence of significant investment, water companies are adopting a risk-based approach to prioritising their asset management programmes and capital expenditure in order to protect the integrity of their supplies.”

Marsh is recommending water companies to embed these risk-based asset management programmes within their broader management systems. This approach can be complemented by enhancing security at critical locations and relocating moveable plant to reduce damage risk. The introduction, development and delivery of emergency and disaster planning and training can also be highly effective.