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Global Marketplace Insights – Construction Q1 2024

Market Insights

April 16, 2024

Maria Sanchis, Global Head of Construction Broking, discusses the current market conditions for the construction insurance marketplace.
Global Construction market insights

Hear from our experts and learn more about the latest insurance marketplace trends


Global Marketplace Insights – Construction Q1 2024

Hello, this is Maria Sanchis, Global Head of Construction Broking.

I'm going to share with you our quarterly global marketplace insight for construction and give you a snapshot of some of the trends we're seeing in the different regions.

2024 marks a period of great optimism for the construction insurance industry as it moves away from the hard market cycle that has been in effect for many years with construction output set to grow.

But inflation and interest rates uncertainty is still impacting the insurance industry after another record year of catastrophic events in 2023.

While the prolonged period of inflation is easing, continued uncertainty will cause moderate rate increases across most regions, which can partly be attributed to a consecutive Nat-Cat insured losses amounted to about 100 billion in 2023, which is now becoming a norm rather than an exception.

Yet expectation of flat rates and slight discounts for best in class risks and clients are indicated in some key territories with positivity also reflected in good capacity across most lines, new entrance into the markets and regional investments.

This year, activity and growth in the global construction industry will be led by large scale government spending and supported by private investment, mainly in infrastructure, both aging and new, including roads, railways, airports, ports and urban mobility projects, and in the energy sector, predominantly in renewables as population continues to grow at a very fast pace.

And because of the need of accessible and reliable energy supply and to comply with countries decarbonisation plants. Heavy investment in manufacturing is expected, particularly in the technology sector, with many projects to commence construction works this year, including semiconductor facilities, gigafactories and data centres across various regions, but notably in North America, Latin America and Europe.

Yet construction activity is expected to retract in some countries within Europe and Australia due to the increased construction cost for projects and as a result of economic factors including high inflation, elevated interest rates and labour shortage.

Well adopted, strict technical underwriting criteria, more predictable coverage and confident pricing adequacy will likely lead towards an improvement in combined ratios for most carriers and create a stable rate environment.

However, rising claims costs will likely also impact markets profitability, particularly in key cost factors such as healthcare, construction materials, workforce and litigation.

And some insurance might even struggle to maintain rates and perhaps not raise pricing fast enough to cover record growth in expenses.

In general, insurer capacity remains robust and plentiful globally, among all commercial construction lines of business except for project specific professional liability and inherent defect insurance (IDI) where in some regions we are still experiencing lack of lead insurance available and continuing increase in rates and deductible in most type of projects. For excess umbrella, GL, Auto, in the U.S. we also face continued challenges on the primary working layers, but do see new capacity coming into the market.

Some insurers are actually expanding their capacity further and markets at higher excess layers are putting additional pressure which is all resulting in some favourable rate results.

We are also seeing entrance in the Builders Risk CER markets at this more attractive level of terms and conditions and anticipate that due to pressure in competition and growth some well-established existing markets will be less conservative in deploying their capacity than in past years on this more desirable projects and clients and in some cases result is in placements being oversubscribed.

Some international carriers are opening operation in countries which have been traditionally dominated by local insurers, creating more options to our clients and offering further capacity, particularly for large and complex risks.

Trade renewal feedback indicates that there are intentions and pressures for markets to increase deductible levels and restrictions of coverage in Nat-Cat exposed risks in Builders Risk CER, when delayed start up is required on defects LEG3 due to recent case law and in respect of PFAS as well as cyber exclusions and casualty.

Familiarity and closeness to the risk plays a key role in underwriting flexibility.

Where markets are focusing on retentions of risk with favourable loss experiences and long-term relationships, particularly on annual programs. We're seeing clients contemplating and exploring traditional insurances, alongside alternative risk solutions such as parametrics cover and larger captive participations.

This creates an increased opportunity to manage more challenging risks and to structure protection for projects in different ways, thereby enabling greater choice for clients.

Hopefully you will have found this global marketplace insight informative.

See you next series.


Maria Sanchis
Global Head of Construction Broking

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