Global construction market update

Global macro trends point to an encouraging outlook for the construction sector.

Investments in both new and existing infrastructure and technology, the rapidly evolving energy transition, actions to address the practical impacts of climate change, the reshaping of supply chains, and other indicators all offer reason to be confident about the construction industry over the longer term.

In 2023, a tightening interest rate environment, broader input cost uncertainty, and a lack of confidence in some regions delayed anticipated spending. In addition, the expected slowdown from growth rates in 2021 and 2022 materialized.   

A combination of insurance market capacity withdrawal over the past five years and the inflationary effect on project values has greatly reduced capacity adequacy compared to the beginning of the tightening global market. Over this period, we saw a reduction of as much as 42% in the availability of global construction insurance, with resulting impacts on pricing and terms and conditions. Nonetheless, the sector is increasingly viewed as attractive, and the direct and reinsurance market broadly understands the long-term opportunities available.

GLOBAL UPDATE

Treaty renewal outcome

Since 2019, insurers focused on construction and engineering risks have taken steps to address poor underwriting results. The impact of these changes is now becoming evident, with underwriting results in the past five years looking markedly better than in the several years prior.

There was little increase in (re)insurer capacity at the January 1, 2024 renewals. Reinsurers remain alert to the continued deterioration of underwriting results prior to correction actions being taken since 2018, and while pricing remains stable, this premium is diluted by losses from prior years that are still creeping out due to inflation, COVID-19 delays, and supply chain friction.

Renewal treaty pricing was considered flat to 5% improvement for loss-free programs. A buoyant reinsurance market secured renewal outcomes per their plans for most construction and engineering insurers. Excess of loss programs renewed at expiring attachment points, with capacity sufficient to meet insurer needs. Market start-up activity or re-entrants started to see an improved pace and we expect a number of modest market entrants through 2024.

Global insurance markets

The latest Marsh Global Insurance Market Index can be read here.