The global construction insurance sector continues to experience high levels of capacity and competition, despite the record natural catastrophe losses in 2017.
Insurers had hoped that last year’s storms would trigger a meaningful change in market conditions.
However, while the placement of cover for large construction projects in catastrophe-exposed urban areas can be more challenging, pricing overall is flat.
There are some notable exceptions though. For example, the professional liability market has hardened, particularly for subcontractors.
The demand for higher professional liability limits is conflicting with subdued appetites from insurers, concerned by fires in high-rise buildings linked to the use of cladding systems.
These concerns have come hard on the heels of a sector still struggling with a plethora of substantial claims for energy from waste projects.
An increase in fire losses for timber-framed buildings has also resulted in focused price increases, while the failure of construction firm Carillion has led to more selectivity from construction bond providers.
High capacity in construction insurance
Despite these pockets of hardening, capacity in the construction insurance market remains plentiful and we are seeing this deployed in embryonic markets such as inherent defects and cyber risks, which are both growth areas for our global construction practice.
Demand for inherent defects cover has been increasing around the world.
Owners and employers are demanding higher levels of post completion protection, especially given the trading difficulties encountered by some of the market’s larger players.
Cyber insurance is another area of continuing growth in the construction sector.
As these attacks and losses are better publicized, awareness of cyber vulnerability at board level is increasing, which is translating into greater demand for specialist cyber cover.
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