KEY TAKEAWAYS FROM FY22: Q3
Premium increases experienced by building surveyors over the last few years have now reduced for some clients, with negotiated premiums on par with the expiring premium. With this said, some policy increases remain in the market, particularly where there is a history of claims, increased activity on large value projects, or high rises, or in line with increases in revenue over the year to date.
With no new insurers entering the building surveyor space, a promising sign has been reputable new capacity to support our exclusive Lloyds of London market. This move suggests a softening of attitudes from the UK towards Australian building surveyors.
Insurer appetite to cover structural, geotechnical, and fire engineering risks remains limited, with very few willing to review submissions to consider terms. Closer scrutiny is applied to the nature of projects undertaken, total project values, claims histories, experience, and qualifications.
Builders operating in the SME construction market have faced several challenges, including shortages in the availability of contractors and sub-contractors, ongoing supply chain challenges, and in some instances, restrictions on the number of workers on sites – all of which have led to increased project costs and delays. In turn, constant monitoring of the landscape has been required to ensure insurance coverage reflects sums insured, maximum construction periods, and risks associated with vacant sites.
KEY MILESTONES / CONSIDERATIONS FOR CLIENTS FOR THE NEW QUARTER (FY22-Q4):
In our Q2 update, we flagged the growing attention from insurers on insureds’ actions to limit risk exposures such as the nature and size of projects undertaken and the use of standard contracts to protect the construction professionals’ interest. While this remains a major consideration for insurers, a recent development has been the close review of insureds’ claims histories. Insurers are now looking for trends in claims arising from similar circumstances and the actions insureds have taken to limit future losses. For insureds, an effective method for addressing this query is a Risk Management Policy and/or Procedures Manual. If an insured can show evidence of regular reviews and updates to these documents (especially if they address the circumstances of a previous claim), this dramatically increases their likelihood of receiving favourable terms.
For builders, Q4 is likely to remain challenging due to rising material costs alongside labour shortages. We are seeing a rise in Eligibility Increase requests as builders’ total construction limits are now being exceeded by increases in costs, especially for timber.
With respect to Construction Works insurance for builders, Flooding in parts of New South Wales and Queensland is expected to cause further premium increases atop an already hard market, however, rates may stabilise over the long term.
While a boom in demand for construction post-pandemic remains, a shortage in materials is contributing to a bottleneck in works being completed and higher contract prices, resulting in higher risks for insurers to underwrite. As supply chain issues are slowly resolved, the construction industry is anticipated to experience strong growth.
BRIC, as a company of Honan Insurance Group Pty Ltd is now fully owned by Marsh Pty Ltd. To find out more, speak to your broker or read the announcement