Construction PI market still difficult but signs of stabilisation for well-managed risks
Construction professional indemnity (PI) insurance buyers that can display good risk management are seeing some market stabilisation but others still face tough conditions, said speakers at Commercial Risk’s latest conference.
They added that the construction PI market is heading “back to basics”, with more stringent underwriting and insurers taking on catastrophic losses, while corporates focus on managing and mitigating smaller, everyday risks.
Construction companies have found it increasingly difficult to secure appropriate and affordable PI cover. A hard market over the last few years has seen the introduction of larger deductibles and more exclusion clauses, alongside price rises.
Expert speakers at Commercial Risk’s Construction Risk Management Europe conference in London said things remain difficult for buyers but look slightly better for well-managed risks.
“Those firms that do the right thing and really adhere to their risk management protocols are seeing some degree of stabilisation in this market. It’s not ballooning like it was two or three years ago,” said Mark Peterson, senior vice president and executive director at Aon Risk Solutions.
But he added that many other construction firms continue to see those heftier price rises as well as higher retentions.
Joe Warner, EMEA manager of professional liability at Scor, said the outlook for construction PI buyers depends on risk management, location of risk and area of specialism. But in general, he said, prices continue to rise and he doesn’t foresee the market easing particularly this year.
“Prices have continued to rise of late but so have the costs to deal with claims… so I don’t foresee a period of rate reductions and there remains a more realistic approach from carriers,” he continued at the event where Aon was the headline partner.
The brokers on the panel said there is a move back to basics in the construction PI market, both in terms of underwriting and the type of risk insurers take on.
“It wasn’t that long ago that we could go to a carrier with half-completed application and maybe the draft project agreement and get a quote. Whereas now there is much more vigour to the underwriting process – what they need and want to see. So that is somewhat getting back to basics when it comes to underwriting and understanding the risk,” said Ante Petricevic, managing director at Aon.
Peterson said that given the rise in attritional losses, the PI market probably needs to move back to where it was ten years ago by taking on catastrophic risk, with day-to-day losses being dealt with by the various parties in the construction industry.
“Given the size of these projects, I think we need to rethink what is the appropriate amount that can be reasonably be insured and what risk the companies should take through risk management. This makes sense in the longer term,” he said.
“I think the owner will take more of the geotech risk because it is their land after all. The contactors and the designer can then mitigate what they can mitigate. So moving towards issues being dealt with that way rather than insurers always being involved,” he added.
