The following article is written in association with CNA Canada.
With capacity levels similar to those seen at the top of the last soft market cycle way back in 2019, construction insurance firms and commercial businesses have been eyeing the market closely, wondering whether or not this trend will continue.
Speaking to IB, Rob Herron, AVP, national construction leader at CNA Canada, said that while capacity is up, there’s also been a decrease in the overall rate strength within the construction segment.
“Capacity is more available in the marketplace than it has been in the last few years,” Herron explained, adding that this increased capacity is reflected by a rise in the number of players involved. “Instead of three or four markets previously, now there are nine or 10,” he told IB.
This surge in market participation has led to a softening in rate strength, particularly within the casualty line of business. Herron pointed out that insurers are decreasing rates and deductibles to hopefully win or retain the business, making policies more attractive to clients. However, despite this softening trend, Herron is cautious about predicting the long-term trajectory, noting that while no changes are expected through the remainder of 2024, the market could shift quickly based on insurers’ year-end financial results.
“We don’t predict significant changes occurring over the next few months to the end of the year; and that can be expected to transcend into the first quarter of 2025,” he told IB.
When discussing how brokers can navigate this shifting landscape, Herron emphasized the importance of understanding policy nuances. Because as rate competition increases, understanding differences between policies and their features becomes crucial.
“Our policies at CNA Canada are tailored for specific industries - like construction and manufacturing - and come with coverage extensions that can really make a difference,” Herron added.
For example, CNA Canada’s construction insurance policies include coverage extensions such as Contractors’ Professional Liability and Building Material Replacement Expense, with standard limits of $50,000. Herron stressed the significance of these details.
“Those nuances within a policy can help when brokers and their clients are comparing apples to apples.” he said.
At CNA Canada, what sets its offering apart is really a myriad of tailored solutions, with Herron emphasizing product features that are designed to address the unique needs of the construction industry without requiring clients to seek additional add-ons.
“We incorporated these features into our policy right from the start,” he told IB. “So clients don’t need to come back and make sure they’ve got Broad Form Completed Operations or Blanket Additional Insureds, its automatically within our policy. Similarly, we do not have an Explosion, Collapse and Underground (XCU) exclusion in our policy, so this doesn’t need to be removed.”
Regarding natural catastrophes (nat-cat) and the challenges they pose to insurers, Herron noted that capacity may not be as readily available in areas frequently hit by such events. He referenced recent Canadian disasters, including hailstorms, wildfires, and heavy rain events in cities like Toronto and Montreal.
“Nat-cats continue to be top of mind for insurers,” he said, pointing out that these events are becoming more frequent and unpredictable.
Earthquakes present another complex risk, particularly in the Pacific Northwest, where insurers are closely monitoring their capacity. Herron added that upgrades to buildings or soil analysis can be valuable in underwriting decisions.
“If there have been any upgrades to buildings or the type of soil they’re working on, this information can be beneficial to us through the underwriting process,” he said.
In these evolving risk environments, Herron emphasized the value of collaboration between insurers and clients, noting that CNA Canada can leverage the expertise and experience of its US & overseas counterparts who deal with similar risks.
“We can communicate with our US colleagues to generate new ideas and concepts and determine a creative solution,” he said. “It can be very difficult for an insurer or a broker to navigate an unpredictable, risk environment, because they don’t know how volatile it’ll be. From the First Party Property standpoint, it is important to provide the insurers as much documentation as possible with details of how insureds plan to protect their job site.”
For insurers looking to navigate the increasingly complex construction insurance space for the rest of the year and into 2025, Herron said it’s all about early collaboration.
“They know their clients’ business much better than we do,” he told IB. “But from an insurer’s perspective, my tip would be to work with us as early as they possibly can. That way we can help meet their timelines and deadlines for their clients.”
And, given the market’s competitiveness, Herron noted an uptick in "re-quotes"—situations where a broker requests a new quote or alternative options after an initial one has been provided. This often happens when brokers face additional competition or need to adjust capacity or terms.
Herron also highlighted the volume of new business submissions insurers are handling. Brokers are diligently bringing their clients’ policies to market, often revisiting their current program because of the shifting landscape.
“The market has changed from last year, and the few years before that,” he pointed out, adding that brokers are adapting quickly to ensure their clients receive the best available options.
