Independent (re)insurance broker Miller has released its latest construction market review for the first quarter of 2024.
According to the report, many construction line insurers were starting to see more profitability following the gradual handing over of long-tail businesses that were written while the market was soft. With the stabilising rates, signs were pointing towards the market already reaching its peak as new capacity were entering the market, which is leading to the belief that it may prompt a gradual softening.
The stability of coverage within the last 12 months is expected to continue in the near future. The recent South Capitol Bridgebuilders v. Lexington Insurance Company 2023 court case in the US has left insurers to become more cautious when it comes to offering LEG 3.
However, it has yet to be known if insurers will be imposing a specific damage definition in their construction policies or if LEG 3 will face redrafting. Currently, the market is restricting coverage for LEG 2 and will only make LEG 3 available for certain risks.
Meanwhile, rates seemed to continue stabilising as there seemed to be more competition in the market along with more insurers willing to grow their books of business. In 2023, many insurers saw positive underwriting results due to healthy rates in the hard market. As new carriers entered the market, rates were anticipated to have reached their peak. However, challenging construction types are still less likely to experience reductions in rates.
Appetite appeared to not have any significant changes as the majority of insurers were still prepared to write several kinds of projects. The London market saw underwriting resources among many carriers in order to cater to the volume of enquiries.
Natural Catastrophe (Nat Cat) was still one of the main considerations of insurers when it comes to international placements. Insurers were also offering predefined levels of indemnity which will be triggered should an insured Nat Cat event occur, which will depend on the purchased level of indemnity.
Capacity in the current market appears to be the strongest that it has ever been, which suggested that the market may already be at the tip of the curve. While there is still a restriction on the capacity for timber frame projects, the presence of a new capacity in the market may make completing such placements less challenging in the future.
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