The construction insurance market has demonstrated a strong phase of stability over the past six months, both in the UK and internationally.
However, insurers have yet to fully capitalise on high levels of tangible profitability that could mark a significant improvement over the prior soft market, according to a report from Gallagher Specialty.
The UK and international construction markets, accessed by Gallagher for risk coverage, have stabilised, with insurers focusing on building long-term sustainable portfolios. While there is adequate appetite for major international construction risks, caution persists as rates plateau and the market softens in some areas.
Underwriting capacity remains stable but is occasionally pressured by the increasing frequency and contract values of mega construction projects.
Though new entrants to the market have been limited, those that have entered mainly provide follow-market capacity, causing little disruption to major projects.
Established insurers are deploying more of their capacity to maintain market share, with some accounts in the UK seeing savings of approximately 20%.
Coverage terms have stayed consistent, with insurers exercising caution in deviating from core product offerings. Legal developments, particularly in the United States regarding design and defect coverage, have led to heightened scrutiny in policy wording. Rating has largely remained steady, though downward pressure has emerged in competitive segments, particularly for annual contractors' accounts.
In natural catastrophe (NatCat) coverage, pricing has held steady.
The 2024 Gulf Coast windstorm season has been less severe than modelled, reducing expectations for significant upward pricing adjustments. However, non-modelled secondary perils like hail and floods continue to drive recent losses, particularly in the Middle East.
The casualty construction insurance segment has also seen increased competition, driven by new entrants and the expansion of existing teams. Rating remains buoyant, bolstered by the absence of large-scale building and civil projects. However, ongoing insolvencies could make instalment premiums a concern in the near future.
International casualty markets, particularly those centred in London, remain attractive for their consistency and longevity, although caution persists for projects with higher risks, such as high-rise residential developments and regions prone to bushfires.
While stabilisation has characterised recent trends, challenges like social inflation, political tensions, and evolving construction methods continue to temper market growth.
With these dynamics in mind, will insurers’ focus on long-term sustainability lead to greater profitability, or will the cautious stance hinder potential growth opportunities? Share your thoughts below.
