In Europe, rate increases from previous months have been aggravated due to the consequences of COVID-19
The global construction industry at mid-year has faced extraordinary circumstances that have created unbelievable uncertainty across all segments of the business, finds Willis Towers Watson in its Global Construction Rate and Trend Update.
The full impacts of COVID-19 globally are still manifesting themselves, with impacts ranging from project cancelations or delays, financing issues, supply chain instability, increased site safety requirements, new ways of working and margin pressure.
The insurance market responses to the pandemic crisis have not just been in terms of the rate increases but in revalidation of previously quoted project terms, imposition of specific COVID-19 exclusions, difficult negotiations for policy extensions and overall increased underwriting scrutiny.
In addition to the impacts of the pandemic crisis, current civil and political unrest across the world is focusing attention around exclusions for riot and associated risks.
In Europe, rate increases from previous months have been aggravated due to the consequences of COVID-19. Underwriters responses have slowed down and most of the big contractors’ renewals have been very difficult, especially in General Liability.
Mid-market has fortunately coped better. Willis Towers Watson does not foresee quick changes as capacity remains scarce as a consequence of the exit of some markets. In particular for Construction “All Risks” policies, some of the coverage terms which were typically available one year ago have now disappeared. Rates and deductibles are going up with limited room for maneuver. Another noticeable effect of the hardening market is more scrutinised claims with payments taking longer than usual.
Within the London insurance market, the last six months has seen more extensions to project periods than ever before. This has also been exacerbated by the pandemic. London has been at the forefront of creating a number of exclusion options to cope with this, although there is a natural resistance to accept such an exclusion on a “live” policy.
Capacity remains stable at circa $3.7 billion, but as always this is on the basis of every underwriter writing their maximum line and on a “best risk basis”. On average, rates have increased by 15%-20% although certain relevant factors such as type of project and any specific exposure such as natural catastrophes changes this.
More business is coming from other regions that previously remained insured in that region due to either some carriers ceasing underwriting within the region or local underwriting authority being cut back. Notable examples are Latin America, CEEMEA and the Asia Pacific territories.
Claims continue to be made, some of them significant in amount, which equally continues to drive a tough position by all carriers bringing further concerns over continuing increased rates, selective underwriting and close attention to scope of coverage.