Construction insurance capacity grows while pricing remains stable

Global insurance advisory firm WTW has published its global construction rate trend report which suggests the outlook for business placements is very positive for some lines and stable for others. In Canada, they say the market for operational insurance renewal placements has softened since the last global report was issued. 

“There is an abundance of market capacity for both property and casualty (P&C) renewal placements with ample competition which is leading to favourable terms and outcomes,” the report states about the Canadian marketplace.  

Globally, they say the construction industry is growing, with growth expected to exceed 7.8 per cent in energy sectors and 5.1 per cent in utilities and infrastructure projects in 2024. Pricing across most regions and product lines is expected to remain stable through 2024, thanks to competition, despite higher interest rates and inflation.  

Improving productivity 

They add that the construction industry is increasingly investing in technology to address labour shortages and enhance efficiency. “Innovations such as artificial intelligence (AI), robotics, drones and wearables are increasingly being utilized to capture data and improve productivity. All indicators point to a positive market outlook as we finalize the year.” 

The report, Global construction rate trend report: Q3 September 2024, also looks at rate trends by country and region. In Canada, the report dissects likely rate reductions by business line (only practice professional liability lines are expected to increase), including the drivers which are causing the rate reductions in primary, umbrella and excess capacity business, automobile liability and property and contractors equipment floater business.  

“We are now observing capacity levels similar to those seen at the top of the last soft market cycle in early 2019 in most regions in the construction insurance market and in most commercial lines of business. We expect this positive trend to continue during the second half of 2024 and into 2025,” the report states, referring to the global aggregate numbers.   

Catastrophe events 

That said, they add that catastrophe events remain a concern with insurers still carefully managing pricing and capacity in areas prone to natural catastrophe events and secondary perils like wildfires, floods, cyclones and hail. “Although immediate changes in terms of pricing might not be significant due to cautious underwriting, we expect more noticeable adjustments in 2025 and beyond,” the report adds. It also says brokers are more essential than ever. 

“They play a vital role in presenting risks to insurers and providing analytical data that guides markets toward the most suitable solutions and program designs,” they conclude. “Effective management and strategic insight are key; without these, clients risk facing policy restrictions or higher ratings. Brokers’ expertise ensures that clients secure the best possible terms and conditions.”