Expectations for construction risks: Rate, terms and conditions
The U.S. construction property and casualty market continues to exhibit rate stability. While the market remains soft, a level of underwriting restraint has started to take hold. Much of this is driven by the continued deterioration of the automobile liability market; auto liability — often regarded as an “add-on” in the past — has become the tail wagging the dog for the casualty customer.
Much of what we stated last year is worth repeating:
- Underwriters are disciplined in taking a hard look at loss history and safety procedures when reviewing accounts. Contractors who do not manage safety well will find a harder market than industry averages would suggest.
- While pricing remains soft, markets are looking to decrease their exposures via policy exclusions and limiting endorsements. This is particularly true with some of the newer market entrants and the excess and surplus lines markets. When reviewing quotes — both from new or incumbent carriers — possible exclusions, such as residential exclusions, broad wrap-up exclusions, anti-stacking endorsements and others must be fully vetted to avoid sacrificing long-term stability for short-term pricing.
One final note as we continue to move through 2017. The U.S. insurance marketplace continues to expand, given the entrance of foreign-based firms. It’s not uncommon now to see what were historically foreign-based underwriting companies set up shop in the U.S. focusing on lines of business such as builders risk, excess casualty and professional liability, for example.
The market expansion is driven by several factors, including a change in how/where underwriting access points are most efficient for brokers and buyers. We’ll likely continue to see this expansion with the caveat that some lines of business may not be sustainable, given the considerable competition which is driving rates down. For now, however, the expansion and competition make it a buyer’s market in those coverages.
View the full Construction Insurance Marketplace update for Karen Reutter’s views on the expectations for construction risks in the U.S.