Global construction insurance market update

As we emerge from Q2 2021, the construction insurance market has aligned with many of our predictions from the early part of the year. Rate increases continued for most lines of coverage while coverage remained challenging in several others, but at the same time, we have seen signs of late cycle underwriting behavior in some key lines of cover. While not a softening market per se, rate increases have begun to moderate in many lines with a few notable exceptions (cyber being the highest profile) and we expect that this will continue through the end of 2021.

• As predicted, the market is clearly differentiating between accounts with good loss experience versus those with more challenging ones. Underwriters are looking back several years (often 7 to 10 years) to determine how they view historical profitability.
• Property including contractors’ all risks (CAR) / builders risk (BR) has significant capacity in most regions outside of catastrophe areas and rates are moderating to in some cases flat to year end 2020.
• For casualty lines (outside the U.S., motor, general liability, excess liability, etc., inside the U.S. including worker’s compensation) the story is different between primary and excess placements. Primary annual programs are attracting competition to the extent that a flat result from 2020 is not uncommon with some rates decreasing for better risks. For excess liability, rates continue to rise but at a slower pace than earlier in 2021. Notably, requirements for higher attachment points for first layer excess programs have remained in place and likely will remain at these new elevated levels in the future even as the market moves into a softening mode.
• Professional indemnity (PI)/liability coverage, which was the first significant line of coverage to harden in most regions, remains difficult but has begun to stabilise from a rate standpoint. However, capacity has not returned in most markets notably London.
• From a coverage perspective, we continue to see difficulties in London Engineering Group (LEG) and delay in start up (DSU) for CAR/BR coverage and the delays caused by COVID-19 have created questions on when a delay began and if the cause is covered. We expect courts will continue to look at COVID-19 claims for many months or years but to date, more rulings have benefited insurers.
• For casualty coverages, coverage restrictions have tended to focus on shortening limits particularly in excess towers with the growth of project specific liability (CIP) policies and programs. This trend has reduced capacity for excess towers for North American contractors who were accustomed to excess of wrap coverages throughout their master towers. This is much more difficult now as insurers focus on not potentially duplicating limits on the same project

How should construction risk managers respond?

Utilise analytical tools to evaluate efficacy of current program structure

Prepare for continued increases in insurance pricing

Evaluate adequacy of insurance changes embedded within bids and contracts

Consider alternative risk transfer (ART) program structures

Begin discussions regarding viability very early, as much as a year prior to renewal, as utilisation of ART structures may involve a lengthy educational process for internal stakeholders, owners and insurance partners.

Continue to develop and strengthen relationships with incumbent insurers

Take time to develop new relationships. Off-cycle market meetings with incumbents as well as potential alternative insurers are valuable.

Begin the renewal process a minimum of 180 days prior to program expiration

Work in conjunction with your insurance broker to develop comprehensive and accurate renewal data

Evaluate project schedules related to project placements

If a project has been delayed for any reason and will require the extension of any insurance placement, begin this process as early as possible. Project extensions have become challenging to obtain and can be quite costly

For more details, please download the full report below.

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Contacts

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Bill Creedon

Global Head of Construction

Bill Creedon is the Global Head of Construction for WTW. During his time in the industry, Bill has held a variety of roles ranging from client management to local and global leadership. Over the years, Bill has gained experience with a broad spectrum of heavy civil and building contractors. Bill also works closely with the Graduate Development Program at WTW dedicated to fostering young talent within the company. 

email Email phone +1 303 803 9125

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Iain Drennan

Regional Construction Leader, Australasia

Iain leads our Australasian Construction team servicing all facets of the industry, managing global insurance programs for large international contractors, principals and financiers.

email Email phone +61 481 038 260

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Mark Thompson

Broking Director, Construction Risks

email Email phone +61 2 9285 4159

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