Through the roof: construction premiums are still rising
Building back better The construction market has seen capacity withdrawn and prices surging amid challenges in both material damage and liability By Wendy Pugh
W
ith natural disasters, flammable cladding, building defect problems, rising worker injury costs and a pandemic, the construction market has undergone a fair amount of recalibration in recent months. Underwriters have stepped back from areas seen as unattractive and some have withdrawn altogether while pricing has responded sharply after being in the doldrums in an extended iteration of the insurance cycle. Willis Towers Watson Regional Construction Leader Australasia Iain Drennan says construction globally has experienced challenges, but the local market has seen heightened pressures in response to the plentiful capacity and low prices that had prevailed for so long. “I would say the shift to remediate portfolios in Australia has been sharper than in other parts of the world, but that is a function of how competitive local premiums had become in Australia,” Mr Drennan told Insurance News. Prices are still on the rise, with a Willis Towers Watson mid-year update pointing to Australasia primary construction liability rate gains of 30-60%, annual builders risk/contractors all risks increases of 15-25%
and primary design and construct professional indemnity gains of 40-80%. Globally, an unprecedented number of insurers have exited the construction market since the dynamics started changing a couple of years ago, taking with them close to $US1 billion in capacity, international broker Marsh says. Underwriting control has been shifted from regional branches to head offices, leading to greater alignment between regions, while annual discussions have often become more testing. “Although insurers’ own treaty renewals have generally gone smoothly in 2021, there is more pressure to manage policy limits and extensions. Coverage and deductible levels have also come under the spotlight across all regions.” In Australia, Lloyd’s underwriters have pulled back in the past couple of years following a focus on remediating underperforming portfolios, while other insurers also reassessed. On the material damage side, natural perils and water damage have been a focus, while harder-toplace catastrophe-exposed risks and challenging engineering projects have taken the brunt of larger
insuranceNEWS
October/November 2021
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