Builders' risk insurance market remains tight

Builders' risk insurance market remains tight | Insurance Business Canada

Builders

Despite some softening in other sectors across the country, Canada’s builders’ risk insurance market remains tight and higher deductibles and rates continue to reign. Cansure is looking to take brokers’ headaches away and help them navigate the space, said Ed Quek, vice president of commercial lines and construction at Cansure.

“Our wording is strong, our products are tested, all of our suppliers are benchmark domestic A-rated — we place 100% for you in the frame construction space,” Quek noted.

The builders’ risk market was balanced until two years ago when syndicates globally deciding to reduce or exit construction completely caused a huge contraction in London and a radical shift at Lloyd’s as they retracted capacity.

“There were very few syndicates left standing that do engineering and construction in London, and because of that there was a massive shortage that came about,” said Quek, adding the shortage on the large frame side of the construction marketplace raised the rates up 20-25%.

“That’s when we started asking, OK how do we feed the marketplace? We have supplied things in sufficient capacity to fill that void, so to speak. A lot of large structures are being built and it’s not stopping — it’s kept us really busy in the last two years.”

When COVID hit in 2020, the construction space budgeted for a decrease as they anticipated there would be a stall, with people building less because of uncertainty, and in the beginning builders did pull back. But towards the end of last year, “we started seeing a lot of starts — more than in previous years — as builders took advantage of low rates and high demand,” Quek said.

COVID caused some challenges including delays as various restrictions were put into place in some areas. Ontario had to shut down, for example, but BC maintained a skeleton crew, “so there was a lot of variation across the country that extended a lot of projects; which translates to a lot of premium — so from an insurance perspective a lot of the construction brokers and the markets were very busy extending policies because of COVID and that translated to the residual growth.”

In the hard market, brokers were finding it difficult to piece together large frame builders’ risk and Cansure streamlined that with up to 12 or 13 insurance companies on a large project by aggregating every available capacity from every insurance company that writes it into one program.

“That’s how we’re able to provide the full capacity without the hiccups of trying to panic and put it all together which was the issue brokers had,” Quek said, adding even with knowing every single market and going to “the four corners of the earth, sometimes we still have difficulty in terms of providing supply.”

Quek predicts there may be new players coming in and that can adjust the pricing and available capacity. He said the market will be stable going forward, although supply coming into the space is key. “We’re one of the largest writers of frame construction in the West — and if carriers want to write frame COC, we offer them a part of our program,” he said.
 
One of the biggest missteps brokers can take is to use multiple small MGAs to put together a policy, because if any of them have contracts cancelled by their carriers, they may not be able to extend and that jeopardizes the whole insurance policy while in mid-stream construction.
 
“We’ve seen that happen and the whole insurance collapses and the bank doesn’t forward the loan and it stalls the project, or they have to come to a large player like Cansure after the fact — and there’s a premium that comes with that,” Quek said.
 
What little bit of money they might have saved up front is lost as they end up paying twice as much after the fact, when they might have been better served coming to Quek and his team in the first place.
 
“We create services and products to help brokers, and hopefully they’re happy with our service and our ability to supply the capacity for the large frame and high-limit wrap market demands,” he said.