Capacity boost for global construction insurance market

The global construction insurance market is experiencing a notable increase in capacity levels in most regions and most commercial lines of business, similar to that seen at the top of the last soft market cycle in early 2019, according to WTW’s latest Global construction rate trend report.

The broker said it expects this positive trend to continue during the second half of 2024 and into 2025 due to insurers’ growing interest in maximising local capacity and pressure from new market entrants as they establish themselves, including renewed interest from internationally based (re)insurers and returning former market players.

WTW said this competitive environment is expected to increase appetite and improve terms and conditions for buyers, and help alleviate the need for significant rate increases. Pricing across most regions and product lines is anticipated to remain stable throughout 2024, said WTW.

It added: “The continuing soft market is likely to generate interest in addressing coverage gaps, including large and complex CAR/EAR risks, heavy civil infrastructure, project-specific professional liability and inherent defect insurance coverage. This is particularly relevant in Europe, Asia, Australia and New Zealand. Positive opportunities are also likely in auto liability and lead umbrella casualty lines in the US.”

WTW said there are still ongoing industry challenges such as high interest rates and persistent inflation, lack of specialised workforce and uncertainty on claims, rebuilding and litigations costs. It also noted that continued impact of natural catastrophe events remains a major concern and challenge in heavily exposed territories, particularly for windstorms in the Caribbean, and Gulf of Mexico, the US East Coast and parts of Australia, Asia and LatAm.

“Insurers are still carefully managing their pricing and capacity aggregations in these areas, including secondary perils like wildfires, floods, cyclones, and hail, which affect many countries worldwide. There is a close emphasis on locations in Europe and in the Americas, which has also led to a higher demand for detailed project information and a greater emphasis on risk mitigation strategies, risk profiling and modelling,” said WTW.

The report notes that the construction industry is set for growth, driven by energy, utilities and infrastructure projects, which are expected to increase by 7.8% and 5.1% respectively in 2024. Additionally, heavy investment in manufacturing is anticipated, particularly in the technology sector, with semiconductor plants, giga factories and data centres being built across North America, Latin America and Europe.

WTW said that elections have caused delays in investment decisions that directly affect the construction industry but added the outlook remains optimistic for large infrastructure projects, particularly in the UK and the European Union.

Iain Drennan, head of construction, Australia and New Zealand, said: “All indicators point to a positive market outlook as we finalise the year. The resilience of the construction insurance market continues to impress in the face of persistent economic headwinds, and contractors are finding innovative ways to manage risk. Quality underwriting information and positive loss history are paramount in gaining the right momentum: brokers should concentrate on presenting the risk to the insurers and offering analytical data to guide markets towards the most appropriate solution and program design.”

The Construction Risk Management Asia Conference is taking place in Singapore on 17 October 2024. It brings together senior risk leaders from contractors and project owners, insurers, brokers and other service industry firms for a full day of debate and analysis. They will explore how firms are adapting their approach to risk, changes to risk strategies, the evolving role of risk leaders in the effort to manage and mitigate existing and new threats and the collaborative approach required between insurers and the industry in order to develop solutions that enable the transfer of risk.

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