Construction
A slowly strengthening market
The insurance market for construction risks is slowly rebuilding after many insurers exited this segment five years ago because rates were deemed too low. Rates have improved since and this has attracted new capacity providers recently who are free from historic long tail losses.
Changes in policy terms and conditions
Insurers are increasing water damage deductibles and reducing limits. They are also introducing restrictions on natural catastrophe coverage especially in Florida.
Underwriting changes
Argenta Cincinnati has entered the insurance market for construction. Furthermore, Sophie Hitchcock has become the head of Aviva Construction.
Notable claims
The market has experienced a number of expensive claims related to water damage and mould and fungus.
New solutions
Parametric is a product that is gaining further momentum. Many construction insurers have deployed a significant capacity in highly natural catastrophe (Nat Cat) exposed locations and are experiencing aggregation issues as a result. Parametric coverage provides an alternative solution to help manage this challenge.
Outlook
Expected range in rate changes for the next 6 months for claims-free portfolios
This rate expectation applies to construction risks everywhere in the world and is in line with the US domestic markets.
Expected capacity change in the next 6 months for claims-free portfolios
Insurance capacity is increasing for US risks. In addition, capacity for Canada is rising driven by managing general agents (MGAs).
Expected coverage change in the next 6 months for claims-free portfolios
To achieve the best possible outcome at renewal, insurance buyers should start to prepare and gather the relevant material early to allow for plenty of lead time. This will ensure that insurers can review the information and understand the risk exposure before offering a quote.
Many construction insurers have deployed a significant capacity in highly natural catastrophe (Nat Cat) exposed locations and are experiencing aggregation issues as a result.
Emerging risks
We are encouraging clients to further evaluate their dependency on their technology supply chain, especially following the CrowdStrike event. Coverage could be altered as a result of this contingent business interruption component. We are working with clients and prospects to understand where there may be gaps in their property programmes for cyber events.
Renewal recommendations
We are currently advising clients that the market conditions are still favourable and that we should be looking at continued reductions, although the extent of any reduction would likely be less than last year.
For further information, please visit the Lockton Specialty page, or contact:
Tom Hester
Partner - Global Construction
E. thomas.hester@lockton.com