Growth in construction insurance market capacity promises stable pricing and enhanced terms for clients into 2025

LONDON, September 5, 2024 — The construction insurance market is experiencing a notable increase in capacity levels last seen at the peak of the previous soft market cycle in 2019, across most regions and commercial lines of business. This trend is expected to continue during the second half of 2024 and into 2025 due to insurers’ growing interest in maximising local capacity and pressure from new market entrants as they establish themselves, according to the Global construction rate trend report, published today by WTW (NASDAQ: WTW), a leading global advisory, broking, and solutions company.

The report analyses market conditions for the construction insurance marketplace worldwide. Some key takeaways include:

• Sector Growth: The construction industry is set for growth, driven by energy, utilities and infrastructure projects, which are expected to increase by 7.8% and 5.1% respectively in 2024. Additionally, heavy investment in manufacturing is anticipated particularly in the technology sector with semiconductor plants, giga factories and data centres being built across North America, Latin America and Europe.
• Stable Pricing: Pricing across most regions and product lines is anticipated to remain stable throughout 2024, supported by a competitive environment and the influx of new entrants, despite high interest rates and inflation
• Managed Risk: Pricing and capacity aggregation are still carefully managed in areas with high exposure to catastrophic events, such as the Caribbean, Gulf of Mexico, US East Coast and parts of Australia, Asia and Latin America
• Emerging Opportunities: The continuing soft market is likely to generate interest in addressing coverage gaps, including large and complex CAR/EAR risks, heavy civil infrastructure, project specific professional liability and inherent defect insurance (IDI) coverage. This is particularly relevant in Europe, Asia, Australia and New Zealand. Positive opportunities are also likely in auto liability and lead umbrella casualty lines in the US.
• Elections and Investment Delays: Elections have caused delays in investment decisions that directly affect the construction industry. However, the outlook remains optimistic for large infrastructure projects as we enter 2025, particularly in the UK and the European Union
• Technological Investment: The construction industry is increasingly investing in technology to address labour shortages and enhance operational efficiencies. Innovations such as artificial intelligence, robotics, drones and wearables are increasingly being utilised to capture data and improve productivity.

Iain Drennan, Head of Construction, Australia and New Zealand, said “All indicators point to a positive market outlook as we finalise the year. The resilience of the construction insurance market continues to impress in the face of persistent economic headwinds, and contractors are finding innovative ways to manage risk. Quality underwriting information and positive loss history are paramount in gaining the right momentum: brokers should concentrate in presenting the risk to the insurers and in offering analytical data to guide markets towards the most appropriate solution and program design.”