The present COVID-19 crisis has brought considerable changes to the global construction insurance marketplace. However, as those working in the industry are already well aware, the marketplace in this area was already seeing a sizable overhaul beginning well over a year ago. A large amount of capacity has exited the class, and many of the remaining carriers have altered the way in which they approach writing different industry sectors, including reducing line sizes and seeking rate increases.
However, we have also seen some new capacity entering the market. Several senior underwriters have emerged at different carriers and syndicates, in turn forming new property units.
Before we delve further into the issues this presents, allow us to further explore the impact of the current pandemic. Projects have been or will undoubtedly be delayed owing to the pandemic, and as travel-related difficulties do not appear to be resolvable in the near future, offices of many insurers will remain closed until potentially the new year. With all of these delays and potential cancellations, underwriters have begun seeking amendments to policy terms and conditions, either at mid-term or at expiry. Clients should be aware of this as these changes can significantly impact coverage; these variations can sometimes result in not receiving any coverage at all due to a partial or total cessation of work during the period of construction.
All this considered, most carriers are seeking a more even-handed approach to their property book. There is a desire among underwriters to write a greater spread of business with lower percentage participation on any individual risk, a desire unfortunately paired with significant pressure to increase rates.
The reason for this is the market-wide losses that have hit underwriting books — not only during the present crisis but also in the preceding year. As underwriters are looking back on these previous instabilities in a continuingly unstable market, the reasoning behind their view that the present pricing is unsustainable becomes a little more clear. Additionally, a move to offer follow capacity is visible across several key markets, which means that there are fewer carriers willing to offer ‘lead’ capacity.
At Conway E&S, we take an individualized approach. The risk of each project should not be entirely subject to the machinations of the market, and to that end, we seek to broker and pre-underwrite each risk according to its own merits. By working together, we can present each risk in a professional manner with a strong understanding of the technical risk characteristics and commercial goals for each placement, and terms can be achieved that can exceed initial expectations or general trends.
Given the current uncertainty, selecting the right partner has never been more important, and at Conway, we will work to ensure that happens. We have relationships with key underwriters that go back for years, and our knowledge of markets and expertise in this field means we can be flexible and understanding in ways that others cannot.
For more information, please contact Carrie Chappie.