Tighter global construction insurance market expected throughout 2023

While the extent of challenges faced by construction insurance buyers will vary across global geographies, WTW expects the overall marketplace to continue to tighten throughout 2023. In its Global Construction Rate Trend Report – Q1 March 2023, WTW says the rate environment in North America across all lines of construction coverage continues to improve. However, increased claims costs, combined with general inflation, is beginning to put upward pressure on rates, and this may lead to price increases later in 2023, the broker adds. WTW says certain high hazard exposures and contractors with challenging risk profiles will continue to experience rate increases, but the pace of these rises will be tempered as the market improves. In terms of US rate moments, WTW sees the following: general liability and contractors pollution liability (+5 to +10%), umbrella (lead) (+5% to +15%), master builders risk/contractors block programmes (renewable business) (+10% to +20%), excess (+5% to +20%), workers compensation (flat to +5%), project-specific builders risk and professional liability (flat to +10%), and project-specific/controlled insurance programs for excess (+5% to +15% / +10 to +40%). WTW says the unprecedented weather events last year in Australia, with extreme flooding across the east coast, have exacerbated an already strained supply chain, particularly in northern New South Wales and Queensland. WTW says the knock-on effect on the construction industry has been significant liquidations among contractors, and the broker expects that these issues will continue to affect the industry into 2023. For contract works, Australian rates are increasing by 5% to 15%. WTW says insurers have been reviewing their capacity for certain risks and overall it forecasts a continuing trend of insurers providing smaller line sizes. “On a more positive note, we have seen growing interest for Australian risks from the London and European markets, which is increasing competition in the market and tempering rating pressures,” WTW says. It goes on: “We expect that clients with a positive claims record, who can demonstrate good, embedded risk management and have a well-presented risk, will experience increased competition from insurers with more positive outcomes at renewal time.” Rates are flat to +15% for Australian construction liability. WTW says claims cost and inflation will continue to be a significant issue for insurers in 2023. It predicts that primary carriers will continue to focus on quality underwriting information, particularly around clients’ contractor management, quality management, previous loss history and changes in their processes to prevent future losses. In Asia, WTW says there are signs of stabilisation in the construction market, although high risk areas continue to attract underwriter scrutiny and a more cautious approach. There was a slight upward adjustment on premium pricing and deductibles during the last quarter of 2022, with underwriters remaining cautious in deploying their capacity, and this upward trend is expected to continue, says WTW. It adds that line sizes have noticeably reduced across most projects with more restricted terms and conditions being imposed, particularly for projects where underwriters had concerns over project risk management. Rate for construction/erection all risks, third-party liability, professional indemnity, construction plant and equipment, and delay in start-up are all up 5% to 10% in Asia, says WTW. In Latin America there are also signs of stabilisation outside of natural catastrophe-exposed risks, although terms are tightening. Contractor all risks rates are increasing 5% to 20%, and third party liability 5% to 10%. “We have seen an even further increase in nat cat pricing and loss limits in exposed areas in the Caribbean and Gulf of Mexico… Also, we are still experiencing lack of overall willingness for certain insurers to deploy their full capacity and take centre stage by providing lead terms for large and complex projects,” says WTW. It adds: “Capacity was sufficient for most projects but for the larger risks when insureds approached international markets, they found more stringent requirements than those imposed in the domestic and regional markets.” On 7-8 June 2023, Commercial Risk will host its fourth Construction Risk Management Conference in Europe. For more information about attending, speaking or partnering please visit: https://events.commercialriskonline.com/CRM-Europe-23

Tighter global construction insurance market expected throughout 2023

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