Willis Towers Watson (WTW) is fully aware that the UK construction insurance market hardening “may not be news to everyone,” but the broking giant is keen to outline its experience and share the main considerations the company sees as key to securing the best terms.
The firm’s UK construction practice – which confirmed that the hardening that was initially focussed on projects is now also seen in annual programmes – said insurers are looking to tighten up wordings, reduce limits, and impose exclusions. Additionally, according to WTW, water management plans are being required and heat restrictions are being imposed by excess third-party liability insurers.
“In our opinion,” declared the UK construction team, “the key to obtaining best terms is three-fold – time, information, and marketing strategy.”
First, WTW stressed that the usual 90-day timeframe for renewing project insurance is now considered insufficient.
It noted: “In previous years when looking to re-market an annual risk, there would be plenty of insurers willing to look at new business. Throughout 2020 and so far in 2021, most insurers are more interested in retaining the business they have and there is a very low appetite for new business.
“In the instance that an insurer is willing to look at new business, they have to review and make a business case internally before they can offer terms and engage with a new client. This may take some time and some insureds may not always be willing to wait for that decision, instead relying on the terms from their incumbents.”
The brokerage, though, is expecting “some competitive tension” in the market for renewals, given that WTW has been hearing from a number of insurers that they are actually keen to win annual business.
When it comes to information, WTW said higher quality has become necessary for both annuals and projects, to provide a clearer understanding of the work involved.
Aside from water management plans, the more granular detail now needed also spans flood risk assessment and mitigation, geotechnical report, construction methodology, cross-sectional plans, fire risk strategy, details of contractors, and breakdown of estimated contract value.
“There have been some considerable losses that insurers have suffered over the past five years that have eventually led to the point where all insurance companies are having to take action,” explained the construction insurance team.
“Some losses have been major fires losses,” it went on to note. “Other significant losses include continuous water damage claims within buildings, floods, slips, trips, and employers liability claims. This is on top of the larger catastrophes across the world that have an impact on the insurance companies as a whole, for example the Australian wildfires at the start of 2020.
“The losses need to be addressed and with that the need for insurers to see greater detail of how this will happen, to allow them to seek greater comfort on these risks being mitigated.”
Meanwhile WTW also cited longer timeframes when it comes to insurers providing responses following an underwriting submission. This can be said for both annuals and project business.
“COVID-19, along with the already hardening insurance market has resulted in insurers having to seek many lines of management approval and signoff,” stated the brokerage. “This means that underwriters who previously had underwriting authority now have to seek approval at a much lower level than before.”
It added: “While there is still a good level of capacity available to underwrite even the largest of projects, there are fewer lead insurers looking to provide terms; with many looking to see what others offer before offering to support, possibly at enhanced terms.”
Moving forward, WTW expects the construction industry to see increases in premiums continuing into the year for project and annual insurances alike.
“These increases are likely to happen as insurers and reinsurers look to protect their bottom line and deal with the long tail business that will still hit their books, and will continue to do so for a while yet,” it said.
“Anything that can be done to provide a clear understanding of what will be carried out, with information of greater detail, will contribute to achieving the best terms in this difficult market that continues to harden.”