Rates

• Following steep rises in 2019 and 2020, the pace of rate increases slowed during 2021. Whilst we expect rises to continue, we anticipate that it will be at a slower level during 2022. Certain types of risks, however - particularly those with potential impact of water and projects involving timber frame or cross laminated timber (CLT) - are seeing higher rate increases as capacity is reduced and increased losses continue to be experienced. 
  
• Sub-limits and limits for extensions in cover remain reduced from those available in the soft market, but ‘adequate’ levels can usually be negotiated. Nothing has happened in Q1 of 2022 to change our view on this.
• On Annual programmes, insurers are continuing to push for rate increases as part of their underwriting strategies, but generally increases are far less extreme than on single projects, due to annual clients more easily demonstrating a positive claims history and/or risk managed approach.

Appetite

• Market appetite remains generally broad, however more complex risks such as heavy civils, tunnelling, and CLT/timber frame projects are tougher to place and require more robust risk management information to persuade insurers to participate. In addition, modern methods of construction and new environmental technologies can pose challenges in securing terms and obtaining full capacity from participating markets. 
• Presentation of risk is proving critical in finding the best available solutions as insurers are prioritising which risks to commit their time to with the volume of enquiries in the market continuing to rise. 
• Insurers are strengthening their stance on environmental and social governance (ESG) with such pressures having a growing impact on appetite. There are only a small number of markets willing to offer capacity on projects involving the use of fossil fuels negatively impacting the climate. 
• Throughout the pandemic there was a tendency for Annual programmes to remain most competitive in the hands of their incumbent insurers. As we move away from the unpredictability that Covid initially inflicted, we are starting to see far greater appetite and competitive tension in the market with insurers keen to pick up regular Annual business, as are looking to generate a more consistent and predictable level of income rather than an over-reliance on project business.

Capacity

• Despite market departures outweighing new entrants in recent years, capacity in London for well-presented risks remains strong. Risks are still generally taking longer to place as there remains few lead markets willing to quote, and follow markets can still determine the final terms and total cost in order to commit their support. 
• The level of capacity available on timber frame/CLT projects remains diminished, however capacity can become available where it can be demonstrated that robust risk management protocols are clearly being implemented by the client, albeit at an inflated price. A few markets will provide follow support to selected leaders who impose strict security terms.
• There remains sufficient capacity and appetite for larger construction projects.

For further market information, or to discuss insurance for your construction project, get in touch.