By Samantha Wright
As the construction industry has revived, carriers that pulled back during the recession are now flooding back into the marketplace, causing capacity to be at an all-time high.
This has caused rates to go down, but also provides an abundance of sales opportunities, said Bryant Steele, a broker focusing on the excess and surplus insurance market in Burns & Wilcox’s construction practice.
“I would say, across the Midwest, we are seeing way more business than we were two years ago when it comes to construction projects,” he said. This includes everything from “your more vanilla projects” to edgy, complex loft renovations in historic commercial buildings that often land in the E&S sector.
“People don’t want to just sit on the space anymore,” Steele said. “Every square foot is now taken advantage of – especially in major markets like Chicago and New York.”
Steele has also seen a huge influx of construction, and construction insurance business, in his hometown of Detroit where historic renovation is an especially vibrant class of business.
Being on the E&S side of the equation helps with the capacity conundrum. “Even with all the capacity in the world, some of those very large standard markets aren’t going to want to insure some of the things that the excess and surplus carriers will,” Steele said.
According to the 2015 Dodge Construction Outlook, total US construction starts for 2015 were estimated to rise to $612 billion, up from $564 billion in 2014, and the trend is slated to continue. With the exception of electric utilities and manufacturing plant construction – which are on the decline – all markets in the construction sector are seeing increases in building this year, stoking the industry’s appetite for appropriate insurance policies.
Although the construction industry is rebounding across the country and throughout many different business classes, it is happening more so in certain segregated areas.
For example, “We are seeing a lot of new condo exposure in south Florida,” said Brian Harrold, a construction risk insurance specialist at Norman-Spencer who focuses on the wholesale side. While this presents an opportunity for insurance sales, it is also a very tough exposure to make sense of since there are multiple owners – and thus multiple potential claimants if something goes wrong – within a single structure.
Even so, Harrold said, “We would rather be a part of it than not be a part of it. That’s the biggest hurdle we run into on the wholesale side; we are constantly keeping our eye out for the next hot product. If you truly want to target a tough class or tough exposure, you can’t become complacent with respect to the current market you are utilizing, because carriers appetites change. It’s important to explore new relationships that can support the business you target.”