Index growth sources

Industry Exposure Indexes are developed using the Verisk Global Capital Stock Index. GFCI data are collected from international and national sources. GFCI data are available from the United Nations (UN), the Organisation for Economic Co-operation and Development (OECD), and many country's National Accounts offices. Gross fixed capital investment is measured as the total value of fixed assets purchased less disposals in a given year. Fixed assets include dwellings, nonresidential buildings and structures, machinery and equipment (including telecommunications equipment and computer software and hardware), cultivated resources (e.g., livestock, managed crops, and forest), and intellectual property products. The Verisk Global Capital Stock index is segmented to include only insurable assets (residential, nonresidential structures, nonresidential equipment).

Price changes in the Verisk Global Capital Stock Index process inherently assume the historical construction cost indexes at the time the data were originally reported to the data aggregator. Because of reporting latency, there is a lag in the data of one year. GFCI data are projected forward one year using both historical trends and current year price changes (consumer price index). This projection methodology captures recent trends in inflation. ¹

The construction cost index represents the change in the cost of materials, the change in the cost of labor, and the cost of overhead and profit. For many countries, the cost of labor is the primary driver of the change in the construction cost index. While the cost of materials is an important factor, it has a smaller impact on building costs. In countries where labor costs comprise a smaller portion of the index than the cost of materials, the cost index increases are primarily due to commodity prices, and the cost of labor has little impact on the building construction costs.

The value of capital stock typically increases between 1 and 10 percent annually in industrialized countries. The demand for buildings usually increases about 1 to 5 percent per year, while prices can increase between 1 and 10 percent. In other countries, the growth of new construction and price increases can be higher. For regions like the Caribbean that are dependent on one industry, such as tourism, growth rates can vary dramatically.