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Construction Industry Update: IMEA

The construction industry in Saudi Arabia is expected to register an average annual growth rate of 5.2% from this year to 2028. Growth will be supported by public and private investments in transport, energy, industrial and housing infrastructure projects, coupled with investments in preparation for the FIFA World Cup 2034 and the Riyadh World Expo in 2030. 

Qatar is expected to improve upon a year of near flat growth in 2024 through investment in liquefied natural gas (LNG), renewable energy, and commercial projects, in line with objectives of National Vision 2030, which aims to attract six million annual visitors and increase the tourism GDP contribution from 11.3% in 2024 to 12% by 2030. 

The construction industry in India is estimated to grow by 6.2% in real terms in 2025, supported by investments in energy, infrastructure, industrial and commercial projects. 

Construction output in Sub-Saharan Africa have faced a number of impediments in the past few years, such as high government debt, inflated material costs, and tight monetary policy. However, underdeveloped infrastructure, growing urbanization, and rising population growths – inverse to global trends – all pose prosperous for future construction output.

IMEA

Product update

While the upward trend continued, rate increases in 2024 for builder’s risk were lower than those experienced in previous quarters. Towards the end of the year, rates declined in core industries, particularly for civil and real estate projects with low and non-concentrated probable maximum loss (PML), as well as for certain established industrial risks.

The ambitious Vision 2030 and 2050 targets set by various governments in the region are now becoming a reality, which is boosting market confidence. This has attracted global attention to the region, resulting in increased capacity, budget expansions, growing teams, and new insurers entering the market.

There is ongoing scrutiny of risk information. Clients are increasingly receptive to providing essential data and prioritizing risk management. Deductible levels remained stable, and wider terms and conditions are accepted for specific industries or clients.

LEG 3 availability has significantly improved compared to previous periods. For context, five out of seven quoting reinsurers offer LEG 3 coverage, up from just two out of seven a few quarters ago.

While LEG 2 remains the most commonly offered coverage for design defects, some markets provide broader LEG 3 coverage. Insurers are more receptive to LEG 3 requests in key industries such as real estate, petrochemicals, and power projects, particularly when there are no novel structures or technologies involved. However, insurers are more cautious when projects include complex construction, extensive prefabricated elements, or are combined with delay in start-up (DSU) coverage.

Throughout the year there were a significant number of lender-driven projects, most of which require clients to opt for DSU coverage. The market shift is primarily evident in the property damage section, while insurers continue to evaluate and limit their exposure on programs that necessitate DSU coverage. This often leads to higher rates and extended waiting periods, with rates typically around 2.5 times the property damage rates.

Information remains a top priority for underwriters, with increasing requests for DSU monitoring services. 

Employer’s liability rates decreased by 10% on average. The market remained competitive. Coverage is standardized and often procured as an extension to commercial general liability (CGL) policies. Employer’s liability is not mandatory coverage in the region, although many insureds purchase the cover.

The market also remained competitive for worker’s compensation. Rates decreased by 10% on clean risks. In India, the overall trend in worker’s compensation premium rates was relatively stable.

The auto liability market is variable across the region. Coverage is often driven by standardized wordings. Where there is competition, modest rate reductions may be achievable. The UAE is an exception due to loss experiences. Since Q1 2024, auto premium rates in India have been relatively stable. 

Rating for single project professional indemnity (SPPI) varied among insurers in the Middle East, depending on how the risk profile aligned with their underwriting appetite. The variability made it challenging to analyze rate movements. Despite new entrants in the SPPI market and an abundance of follow and excess layer capacity, only a limited number of insurers and reinsurers offered primary lead terms. There was greater flexibility in coverage for sub-limited extensions, such as fitness for purpose. Clients remained focused on price, purchasing coverage based on contractual requirements. A 10-year extended reporting period is still standard, though some employers insist on three or six years.

In South Africa, single project rates were relatively flat heading into 2024, following several adjustments made after the COVID-19 pandemic. Over the years, South Africa has seen significant price increases and a growing appetite for SPPI, leading to stabilisation. Coverage options are generally consistent among insurers, but deductibles are often set at unaffordable levels. For the rest of Africa, the London or Dubai markets are often approached due to their greater appetite, with limits typically starting at US$5 million.

In South Africa, insurers reduced capacity and opted for co-insurance placements on large accounts. They require risk management process protocols before binding coverage and tend to be conservative in their underwriting of new business, which may include sub-limits and higher deductibles for specific services. Some insurers began to exclude certain professional services from SPPI, such as geotechnical services.

Typically, coverage for SPPI in South Africa is obtained by the employer; however, in some cases, this responsibility is transferred to contractors and professionals. The limits secured are often at the bare minimum due to associated costs, with maximum aggregated limits reaching US$10 million for a total period of 72 months. Unique to the South Africa market is the provision of a retro period from conceptual design, subject to a maximum of three years.

Premiums for PI were volatile and industry-specific in South Africa. The built environment experienced rate increases, mainly due to claims, with premium increases between 7.5% to 10%. 

Claims activity in the commercial/construction surety market were above average. Surety premium rates are largely dependent on the strength of a company’s balance sheet and the security on offer, which impacted some larger construction companies who struggled with profitability amid a high-interest rate environment. A rise in slow or non-payment impacted many companies’ balance sheets, which increased the risk of a company’s non-performance, leading to general rate increases of between 10% to 20%.

Insurers continued to require detailed underwriting information from new and existing clients when issuing guarantees. This impacted turnaround times for quotes and made the underwriting process more onerous.

The surety market in South Africa remained generally flat, with growth rates hovering around 2% to 3%. Previously dominated by a few large companies, the market has faced challenges as these firms have struggled. Guarantee underwriters adopted a cautious approach, as many smaller companies lacked the financial strength to meet guarantee requirements.

Surety is relatively new in India, yet growing demand drove competitive rates up compared to 2023. Reinsurance support is needed on the supply side to meet the growing demand.

The MENA region saw cyber rate reductions of over 25% in 2024. This was primarily driven by new capacity in the market. Overall, cyber coverage and underwriting trends remained stable in the IMEA region. India had more moderate discounts, while in South Africa cyber rates ranged from flat to increases of 10%.

Global construction market update

We hope this update offers buyers a more encouraging picture about the direction of travel for rating in the construction insurance sector in the coming 12 months.