Mass Timber Reduces Construction’s Carbon Footprint, But Introduces New Risk Scenarios

Published on 20th February 2024

The construction sector has one of the biggest carbon footprints in the world. It is responsible for almost 40% of global CO2 emissions. The high emissions are not only based on fossil fuel driven energy consumption, also the reliance of concrete or steel as building materials has a very negative impact on the overall carbon footprint.

A new report from Allianz Commercial, published on February 15, 2024, is taking a closer look at a much more sustainable building material: mass timber. This material has the potential to be a critical building component for the cities of the near future. It is renewable, comes with lower costs and less CO2 emissions. But, even if mass timber has so many advantages, there are still risks such as fire, floods, earthquakes or termites, that need to be mitigated.

These are the key findings:

  • Sustainable construction: use of mass timber offers a short and medium-term solution for the construction industry to lower its massive carbon footprint. Mass timber emits significantly less CO2 with around 50% less than concrete and more than 25% less than steel. Furthermore, it is more cost-efficient but as durable as concrete and steel.
  • Growth potential: Although, the global mass timber construction market is still a niche market, it has an enormous growth potential. It generated US$857mn in 2021 and is forecast to hit $1.5bn by 2031, with a CAGR of 6.0%
  • Fire as main risk for mass timber: Mass timber is still wood, and fire is the primary hazard concern. Fire is already the most expensive cause of all construction / engineering insurance losses, accounting for more than a quarter (27%) of the value of 22,000 claims analyzed over a five-year period, according to Allianz. Ohers include natural catastrophes, water damage, manufacturing, supply chain and faulty workmanship issues, as well as termite infestation.

Mass timber reduces construction's carbon footprint, but introduces new risk scenarios

Mass timber has the potential to be a critical building component for the cities of the near future given the need for the construction sector to reduce its reliance on concrete and steel to lower its Co2 emissions. However, as this market grows and mass timber buildings evolve to greater heights, the construction risk landscape will also be transformed, bringing risk management challenges for companies, according to the new Emerging Risk Trend Talk report from Allianz Commercial.

"The emergence of mass timber as a sustainable construction alternative represents a significant opportunity for the building sector to reduce its carbon footprint while also satisfying a demand for a material that is more cost-efficient but as durable as steel and concrete," says Michael Bruch, Global Head of Risk Advisory Services at Allianz Commercial. "However, in any industry, deployment of new materials or processes can result in new risk scenarios, potential defects, or unexpected safety consequences, as well as bringing benefits, and mass timber is no different. Given this market's expected future growth, companies should do all they can to develop a greater understanding of their exposures including fire, water damage, repetitive loss scenarios and even termite infestation, and ensure they have robust loss prevention measures in place to combat these."

The need for mass timber

The building and construction sectors are among the largest contributors to Co2 emissions, accounting for over 34% of energy demand and around 37% of energy and process related Co2 emissions in 2021[1]. Given emissions reduction is essential to meet climate change commitments around the world, the need for more sustainable solutions in the built environment has become increasingly important, driven by growing investor and consumer concerns, and legislation, regulation and reporting requirements evolving quickly in many jurisdictions around the world.

Mass timber is a relatively new type of engineered construction in which most products comprise multiple wood pieces joined together to form larger, stronger members, which can then be used for roofs, floors, and walls. It is often combined with traditional non-combustible structural materials to create a hybrid mass timber construction style, allowing high-rise timber structures to be built more sustainably – the height of the world's tallest timber building has tripled in just 10 years, with 140 mass timber buildings around the world of eight stories or higher as of February 2022, with 70% of these in Europe[2].

Although mass timber currently only represents a tiny proportion of the overall number of buildings constructed worldwide each year – for example, just over 2,000 residential, commercial, or institutional mass timber projects were in progress or built in the US, as of December 2023, according to the Wood Products Council[3], nevertheless, from mixed use developments to hotels to schools, an emerging market is underway. The global mass timber construction market generated US$857mn in 2021 and is forecast to hit $1.5bn by 2031, with a CAGR of 6.0%according to Allied Market Research[4].

"In addition to being a renewable resource, the advantages of mass timber also include it being a lighter weight material than concrete or steel, while costs may be lower due to less construction traffic and a need for fewer workers," explains Franck Fumat, a Regional Head of Property Risk Consulting at Allianz Commercial. "Off-site manufacturing is typically used for mass timber projects, with elements such as columns, beams and panels being manufactured in factory environments and then erected on-site. This approach offers advantages, such as high levels of quality control and improved efficiency compared to conventional on-site construction."

Hazards, challenges, and loss prevention

However, as mass timber buildings evolve with greater height and intricate designs, they will pose new challenges in terms of risk mitigation. The report identifies a number of hazards and challenges companies need to be aware of, with Allianz Commercial risk consulting engineers also highlighting several loss prevention measures to consider that could help to reduce their impact:


Mass timber is still wood, and fire is the primary hazard concern, with this risk needing to be considered through all the life stages of a building – design, construction, and operation. Fire is already the most expensive cause of all construction / engineering insurance losses, accounting for more than a quarter (27%) of the value of 22,000 claims analyzed over a five-year period, according to Allianz. The risk of collapse during the cooling phase of a fire may be particularly critical for timber elements, while buildings with combustible elements are at the highest risk of fire during construction. Once a building is in operation, the risk of fire can increase depending on factors such as the type of occupancy, storage, and interior fittings. Ongoing research and testing are being conducted to further develop a methodology for evaluating the performance of structural elements during the entire duration of a fire. This includes comprehensive studies of the heating and cooling phases as both phases are especially crucial for evaluating the behavior of timber elements and ensuring optimal fire safety.

2.Natural hazards

Damage from natural catastrophes is already the second most expensive cause of construction claims, Allianz analysis shows. Extreme wind forces, especially during tornadoes or hurricanes can potentially affect beams, columns, and panels, posing a risk of widespread damage, while floods, including river floods, flash floods and storm surges, pose a significant risk to timber buildings. Timber buildings exposed to floods may require structural controls, drying and repairs, impacting expected operating losses.

3.Water damage

Similarly, water damage is already a major source of loss across the construction sector. Mass timber is highly vulnerable to water damage including flood, water ingress, and plumbing leaks. To mitigate water damage, mass timber elements can be manufactured with reduced moisture content and stored in controlled atmospheres. Water management and high-quality analysis are crucial for ensuring the durability of structures.

4.Manufacturing, transportation, and supply chain issues

Mass timber construction has a unique supply chain and manufacturing process that differs from traditional concrete and steel framing. Factors such as the need to have specialized production facilities, as well as just-in-time delivery, means thorough logistical planning and management of building materials are essential to avoid costly project delays.

One significant disadvantage of the assembly line manufacturing process is the potential for a serial loss scenario. If a particular batch of mass timber elements has a defect, multiple elements in a structure or across project sites may be affected. Defective products is already the third costliest cause of construction /engineering insurance claims, according to Allianz.

5.Faulty workmanship issues and repair costs

Construction firms may face challenges in finding experienced work crews for mass timber construction projects, given its nascent status. This can result in productivity issues and safety concerns as crews navigate the learning curve of working with mass timber. Inadequate installation can result in damage which can have significant financial implications for repairs or replacements, while in some cases the cost of repairing or rebuilding mass timber structures could be significantly higher than those made with conventional construction materials.

6.Termite and insect infestation

While not common in all areas of the world, termites and other wood-boring insects may pose a significant threat to mass timber buildings, potentially causing extensive structural damage over time. Given termite infestation usually occurs gradually, the exposure of notable damage during the construction phase is low compared to the operational phase. However, as termites are most likely to attack decaying timber in buildings it is important to ensure timber does not have long periods of contact with water by implementing sufficient protective measures.

Download the full Emerging Risk Trends Talk 2 Mass timber report

[1] UN Environment Programme, 2022 Global Status Report for Buildings and Construction

[2] Council on Tall Buildings and Urban Habitat, The State if Tall Timber: A Global Audit, February 2022

[3] WoodWorks, Wood Products Council, Mapping Mass Timber

[4] Allied Market Research, Mass Timber Construction Market to Reach $1.5 Billion, Globally, by 2031 at 6.0% CAGR, May 3, 2023

Courtesy: Allianz Commercial.

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