SPEAKER 2: Welcome to the Global Construction Market Update special, a subset of the WTW Construction Blueprints podcast. In this short series, you'll hear from our experts on current market conditions for construction insurance.
IAIN DRENNAN: Hello, and welcome back to our Global Construction podcast series, where we are discussing the current state of the market for the Pacific region. I'm Iain Drennan and I'm the Head of Construction for Willis, for Asia-Pacific and Latin America. And I'm delighted to be joined today by Mark Thompson, who is our Construction Placement Leader for Asia-Pacific, and David Williams, who is our Construction Placement Manager for the Pacific region.
Welcome to both of you. Mark, if I can start off with you, please. Can I ask you to talk about the current state of the construction insurance marketplace in the Pacific region?
MARK THOMPSON: Hi, Iain. When we talk about the current state of the construction market in the Pacific region, we're really talking about Australia and New Zealand. And it is important to recognize that while the markets are closely linked, they are not identical.
But right now they're moving in a very similar direction. In both Australia and New Zealand, the construction insurance market is in a phase of improvement after several years of tightening conditions. Insurers are now showing more confidence, capacity is increasing, and competition has returned, particularly for well managed construction risks.
In Australia, we're seeing the strongest improvement on annual construction programs, particularly for established contractors with good claims performance. Pricing pressure has eased, particularly along the contract works liability and professional indemnity, and insurers are more open to discussing different structures and not just headline premium.
New Zealand conditions are also improving, but underwriting remains more conservative, particularly around natural catastrophe exposure, with earthquake risk continuing to influence capacity and deductibles.
Across both markets, insurers remain disciplined around natural catastrophe exposures, renewables, and complex construction methods such as cross-laminated timber and modular construction techniques, which we're starting to see more and more used.
Overall, construction insurance across Australia and New Zealand is more open and competitive, and is rewarding for those clients that are prepared and with strong risk management procedures in place.
IAIN DRENNAN: Thank you for those insights, Mark. Now, Dave, if I can just pass to you, do you mind giving us your thoughts on the market outlook for 2026, please?
DAVID WILLIAMS: Based on current insurer appetite, capacity trends, and recent placements, we're seeing indicative rate movements for 2026 for annual program contract works between -5% to -15%, single project flat to 15%, and general liability, -5%, -20%, excess umbrella liability, -5% to -20%, and -5% -15%.
It's also worth pointing out that these ranges are not automatic, and outcomes do vary significantly depending on risk profile, claims history, structure, and the obvious effectiveness of market engagement. In practice, clients who maintain continuity of placement, early engagement, and strong risk presentations are consistently achieving outcomes towards a more favorable end of these ranges.
IAIN DRENNAN: Thanks, Dave. And are we expecting these current conditions to remain stable, or are they likely to improve from a buyer's perspective? Or how long will this softening of the market continue?
DAVID WILLIAMS: So as it stands, we've seen it being relatively maintained with obviously the capacity coming in. We haven't seen it necessarily being replicated by one individual insurer. It does seem to be across the market, rather than it being one insurer that's standing out across, particularly on the contract works. That seems a lot more stable in terms of the reductions of what we've pointed out.
Liabilities, as we discussed, has had some pretty large reductions in there. But again, we're seeing that mainly driven by clients who haven't necessarily been to market in a while or have potentially been quite significant investment on risk management and in order to reposition themselves within the market to achieve a favorable outcome.
IAIN DRENNAN: Thank you, Dave. Very, very insightful adding on Mark's earlier comments, Mark, turning back to you, can you please touch on the current issues affecting the construction insurance industry and specifically which one of those insurers are paying attention to?
MARK THOMPSON: Yeah, thanks, IAIN. The construction insurance industry has faced a set of structural challenges rather than short-term disruptions. Many of these issues have developed over a long period and are now shaping underwriting, appetite, pricing, discipline, and how insurers are deploying their capital across this sector.
Claims performance continues to be a key pressure point. Design defects, construction quality issues and complex, multi-part losses have resulted in long tail exposures that are becoming difficult to close out. This has weighed on insurer profitability in the past, particularly across construction and professional indemnity portfolios.
Natural catastrophe exposure has become a defining issue for construction insurers. Floods, bushfire, wind, and severe weather events are driving higher loss volatility across material damage, delaying startup and liability covers. As a result, insurers are applying more granular scrutiny on site location. Resilience measures are being implemented, and aggregation of their risk exposures.
Professional indemnity remains one of the more constrained risks. Capacity is limited for particularly project specific placements where we've got design heavy projects, where there's remediation work or there's a higher-- using higher risk construction methods.
Regulatory and lender requirements often exceed what insurers are comfortable providing in terms of limit, which does create some challenges for project feasibility and delivery, although we are seeing improvements in these areas.
Modern construction risks are becoming harder to assess and price. New materials, alternative construction methods, and integrated design and construct models are introducing unfamiliar loss profiles. This has increased underwriting time and the need for deeper technical and engineering input from an insurance perspective, so they can understand the risk that they're looking to write.
Heightened regulatory and scrutiny and governance standards have also increased insurers exposure to systematic and long tail risks. While these measures support improved building quality, they've also contributed to tighter policy terms, exclusions, and in some cases, a more cautious capacity deployment.
Finally, insurers are exercising strong capital discipline. Focus has shifted away from chasing premium volume towards more sustainable underwriting, care for risk selection, and managing their portfolio aggregations.
Overall, the construction insurance industry is operating in a more complex and risk sensitive environment than it did a few years ago, but one that strongly rewards clients with quality risk management can be transparent and with long-term thinking and relationships.
IAIN DRENNAN: Thank you, Mark. It's great to hear that although insurers are retaining their discipline when assessing clients risks, that there is still significant opportunity for those clients that present their portfolio of opportunity in the right way, and it's not a runaway market. Now, Dave, turning to you for the final question, if clients were to take away any key salient points from this podcast, what would you suggest those be?
DAVID WILLIAMS: Yeah, I think from the current market conditions, the key takeaway for the clients and how they can get the best from their insurers is to engage early and transparently, demonstrate strong embedded risk management practices and maintain long-term insurer relationships, and clearly articulate how risk is controlled on higher hazard projects, or particularly where there's natural catastrophe exposed locations.
With those conditions, and with that in mind, we're seeing more competitive premiums, greater flexibility on terms and deductibles, and access to long-term agreements where appropriate.
With all of that in mind, the approach enables clients to fully capitalize on current market conditions whilst maintaining stability and confidence in their insurance arrangements.
IAIN DRENNAN: Brilliant. Thank you. I think there's a lot of material here for our audience to take away and really think about where the opportunities lie and how best to derive those opportunities and make them real. Thank you to our audience. We've enjoyed recording this podcast. We look forward to seeing you in the next one.
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