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Honan Insurance Group has reaffirmed its predictions about the challenging purchasing conditions for insurance cover for businesses at the “high hazard” end of the spectrum.
In its 2019 Quarterly Market Update, the insurer noted the lack of local underwriting appetite and capacity for property with EPS construction or risks within the recycling and waste management industry.
“This has forced a return to mature underwriting markets, such as London, in order to obtain capacity – albeit at reduced levels and significant increase in pricing coupled with reduced cover,” said Andrew Fluitsma, Honan CEO for Australia and New Zealand. “In some cases, businesses have elected to self-insure their risks either partially or completely as a result of these factors. Whilst pricing corrections continue to be widely applied, construction-based businesses, particularly those in design and construct (D&C), and contractor industries have come under significant insurer scrutiny as this market moves from correcting to hardening.”
Honan said insurers are re-engineering their portfolios and applying exclusionary language around cladding and aluminum composite material exposures, in the wake of the fatal Grenfell Tower blaze and the most recent post-Lacrosse Tower fire.
“In the case of the Lacrosse Tower fire, courts identified the liability of consultants across the building chain, including building surveyors, architects, and fire engineers for failure to exercise reasonable care,” Honan said. “This is causing huge concern for the wave of industry PI renewals due in the second half of this year for the construction industry in all states.”
Honan noted that these events could potentially result in the doubling of premiums, the exclusion of cladding-related exposures, and the offering of minor write-back for legal defence costs.
Travis Wendt, Honan’s head of broking and carrier management, said organisations in these industries should do well to disclose the risks they face to underwriters in a timely manner.
“It is imperative that proposal forms are submitted well in advance of renewal dates, as this allows optimum time to negotiate the most favourable terms from the market,” Wendt said. “There’s also good news for businesses considered as ‘vanilla’ as they continue to attract competition from insurers allowing insureds to consider a wider level of buying options with little impact on pricing. Organisations who take the right steps by presenting excellent claims histories and taking a proactive approach to risk improvement or risk management are in a very strong negotiating position, especially in limiting the insurers need or want for a pricing uplift.”
