Insurance Perspective

Jordan Tirone

DeSanctis Insurance Agency, Inc.

Update: Current Construction Insurance Landscape

As we quickly progress through 2021, earlier indications of the construction insurance market tightening have proven to be a reality. Tightening of carrier appetites, reluctance to offer flat renewal extensions (predominately related to builders’ risk), and consistent rate increases are just some of the factors burdening the end using product consumer.

Driving factors within the construction insurance industry include, but are not limited to an influx of large losses, pandemic uncertainties, and higher material costs.

The line of coverage across all industries that has seen the most volatility is excess and umbrella, which have seen upwards of 50% to 100% increases. This has been a product of underlying losses, mainly relating to auto and increased carrier reinsurance costs.

This line is not only experiencing significant price increases but also a major pull back of limits and attachment points. For instance, at the expiration of a policy, a carrier whom was previously offering an excess limit of $10 million may only offer $5 million or less, requiring an additional layer to be placed elsewhere. This certainly poses a concern from not only a pricing standpoint but also in the unfortunate case of a large excess claim, a consumer may be faced with multiple carriers handling that single incident.

Rates for General Liability have recently shown higher than average increases, as well. This is driven by the increase cost of materials and labor shortages in the event of third-party property damage. These two factors are also very apparent on the replacement cost for Builders Risk losses, resulting in policies to be re-underwritten at the time of renewal.

During the pandemic many construction firms reduced premium driving exposures (sales, payroll, vehicles etc.) as a result of shutdowns and labor shortages. Because of this, many carriers were forced to increase premium rates to aid in maintaining loss fund reserves on unknown claims in the past and future.

With the recent focus from Washington around PFAS (polyfluoroalkyl substances) it is likely that environmental (pollution) coverage will start to get a much closer look from underwriters on both a pricing and coverage limitation basis, as well.

Overall, these results should not come as a surprise. Over the past 20 months the everyday consumer, whether it be an individual or business, are experiencing monetary challenges as it relates to their everyday product consumption, unfortunately the insurance market is no exception to this trend.

To combat this burden to the best of our abilities, it is more important now than ever before that insurance agents and brokers be extremely thorough and highlight all possible risk positives when presenting a

construction firm to their carrier partners. n