Rising capacity in construction insurance to Stabilise pricing and terms through 2025, says WTW

The construction insurance market is experiencing a notable increase in capacity, reaching levels last seen in 2019, according to the newly released Global Construction Rate Trend Report by WTW, a global insurance broker.

This expansion is anticipated to continue through late 2024 and into 2025, as insurers seek to maximise local capacity and respond to the competitive pressure brought on by new entrants in the market.

The report highlights the projected growth within the construction sector, particularly driven by energy, utilities, and infrastructure projects, which are set to see significant increases.

Manufacturing, especially in technology-related industries, is also expected to experience substantial investment, with semiconductor plants, giga factories, and data centres under development in North America, Latin America, and Europe.

These trends underscore the broader momentum across the sector, which the report identifies as key drivers of the expanding insurance market.

Despite challenges such as inflation and high interest rates, the report predicts that pricing for construction insurance will remain stable across most regions and product lines, thanks to the competitive dynamics introduced by new market players.

However, the report also notes that pricing and capacity remain closely managed in regions with high exposure to catastrophic risks, including the Caribbean, Gulf of Mexico, and parts of Asia, Australia, and Latin America.

Furthermore, the report points to emerging opportunities as the soft market continues. These include addressing coverage gaps in complex construction and engineering risks, such as large civil infrastructure projects, project-specific professional liability, and inherent defect insurance (IDI).

These opportunities are particularly pronounced in Europe, Asia, Australia, and New Zealand, with additional potential in the US market for auto liability and lead umbrella casualty lines.

The report also touches on the impact of political factors, particularly elections, which have caused delays in investment decisions for infrastructure projects. However, the overall outlook remains optimistic, with a positive forecast for large-scale projects as 2025 approaches, especially in the UK and European Union.

Technological advancements are another key theme in the report, with construction firms increasingly turning to innovations such as artificial intelligence, robotics, drones, and wearable technology to address labour shortages and improve operational efficiency. These investments in technology are playing a crucial role in enhancing productivity within the sector.

Iain Drennan, Head of Construction, Australia and New Zealand, commented: “All indicators point to a positive market outlook as we finalise the year. The resilience of the construction insurance market continues to impress in the face of persistent economic headwinds, and contractors are finding innovative ways to manage risk.

“Quality underwriting information and positive loss history are paramount in gaining the right momentum: brokers should concentrate in presenting the risk to the insurers and in offering analytical data to guide markets towards the most appropriate solution and programme design.”

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