Contractors and construction companies face many challenges that have been building for several years. Increased underwriting scrutiny, tougher terms and conditions, and rate increases are driving contractors to adopt new risk mitigation tools to navigate insurance market challenges.
This new report, developed in collaboration with IRMI, Marsh, and leading construction insurers, offers insights on overcoming risks in the construction insurance market and outlines trends shaping the construction industry.
After a turbulent market in 2020, certain lines of business are experiencing some stabilization. For example, the excess casualty market experienced a difficult eighteen months, with rates peaking in 2020. Although excess casualty rates continue to rise, the rate of increase has slowed. As a result, some companies are turning to nontraditional markets to replace capacity, while others are enhancing their loss control activities.
More construction companies are adopting creative solutions to risk transfer problems. The use of captive insurance is rising, as many construction companies look for tools that may provide some degree of cost certainty and profitability. Contractors are often turning to captive insurance to address contractor controlled insurance program (CCIP) risk and to better understand their insurance costs. Participating in a group captive also provides the opportunity to share best practices with peer contractors in the group.
As the economy recovers from the impact of the COVID-19 pandemic, surety capacity appears to be growing, with new participants continually entering the surety market. Construction companies continue to look for liquidity solutions; the use of bank fronted surety bonds and public-private partnership insurance programs are rising as they allow contractors to expand their credit and maximize the use of their bank credit.
Technology is rapidly becoming a critical part of a construction firm’s business. Leading contractors are adopting technology to better manage their supply chain and projects, as well as to improve their safety, quality control, and project design. Wearables, task automation tools, and robotics are becoming more common on the construction jobsite. Companies that embrace and implement technology in a thoughtful manner are better poised to succeed.
To learn more about each of these insurance trends and construction risk issues affecting the construction industry, download the full report below.