The Construction industry has functioned in a tight market for the last several years, although rates have recently stabilized. Flat to modest rate increases are common outside of a consistent group of challenging sectors that offer tight capacity and double-digit rate increases.
Despite this relatively tight environment, demand for Construction Insurance remains high. Money is being pumped into Midwestern U.S. markets where housing is limited, and home values are high. Many regional and national carriers are willing to place General Liability, Workers’ Compensation and Automotive policies into a joint package although some limits are being eliminated or cut.
Key Takeaways
- The Construction market is experiencing growth across all sectors with the help of a recovering supply chain and the widespread elimination of labor shortages.
- Economic challenges remain, especially as interest rates remain high and the upward trend of inflation increases some expenses.
- Excess & Surplus (E&S) sector growth is particularly significant and is unlikely to slow anytime soon.
- Moderate rate and renewal growth can be expected outside of high-risk sectors and geographic regions, where double-digit increases are possible.
- Completed submissions and telling a detailed account story can help improve chances of placement.
Higher than normal material prices remain, and that, along with other factors, can make it difficult for admitted carriers to forecast likely exposures.
With demand high, the Construction sector is attractive to many carriers as an option to round out their books of business. This trend varies among geographic markets. New carriers are entering Construction but generally are focused on specific businesses and niches.
Excess is here to stay – and continues to grow
Growth in the excess market is increasing by double digits each year as brokers and agents search for more flexible options for their clients. General Liability and Primary policies are being taken to the Excess market as well.
The general trend of ever-increasing claims, lawsuits and runaway jury awards will keep the E&S market in favor as well. Adjustments are being made with rates where needed, but the nimble nature of Excess carriers will benefit the market, as it has within numerous other insurance sectors. Rates will moderately rise, and tight control scrutiny should remain even in E&S. Mixed-use housing and other project-specific residential clients also are headed toward the Excess market.
We are witnessing an uptick in activity from home remodelers investing in their existing properties, whether to increase home value, upgrade to attract renters or for other reasons. That volume of policy updates will also keep the demand for E&S options in play.
Challenged markets are led by Automotive
Some carriers are actively shedding insureds in scaffolding, landscaping and policies related to cranes, bridges, streets and roads. Those sectors are also hitting the E&S market as admitted options wane. Frame carriers are reeling from higher costs and exposure as well.
The biggest challenge often remains in Automotive. For example, 100-fleet units used to be considered a large policy. Today, 15 heavy or extra heavy trucks are considered larger exposures, which drive up prices and limit the carriers who want to write a lead excess policy. Within this environment, policies that used to qualify for $10 million now may get to $2 million, or $5 million, if layered with multiple carriers in the excess space.
As always, some geographic areas are harder to find coverage than others. Florida and Gulf Coast residential properties are always tough. New York offers unique challenges with its labor laws and Texas can be tricky with uninsured subcontractors. Other pockets from Colorado to the Atlantic and Pacific coasts may have higher rates and tighter capacity as well.
Any challenged sector often requires creative layering to reach desired higher limits that are required for contractual reasons. Governmental entities or contractors also have language requirements that can be difficult to attain.
Tips for Brokers and Agents
Brokers and agents will be faced with a challenging market in several sectors. Competition for placement can be intense with many underwriters receiving hundreds of applications daily. While capacity is largely available, here are some tips to increase your chances of success.
1. Tell a detailed account story in each submission. With the volume of applications, your story should be memorable, whether because of its clean loss record or its significant mitigation practices. Any submission should include a:
- Complete loss history of at least 3-5 years, especially for accounts absent of claims.
- Several years of revenues and payroll data.
- Any safety and employment manuals provided to your clients’ employees.
2. Include the fleet’s safety and maintenance plan. Access to telematics data is important, but it is even more important to confirm how that data is being used in a positive way. Such details can increase your chances of qualifying for safe driving discounts.
3. Be mindful of form numbers. Any mistakes in form references, or not completing certain sections of a form, can be damaging to your submission. For example, Forms CG 2010 and 2037 are requested more often now than in previous years.
4. Do not assume contract language will remain the same year-over-year as part of a renewal. Agents and brokers should closely shop potential policies to get the best option for insureds. Use positive features of your account history to your advantage when shopping. Note the presence of any sub-agreements.
5. Consider completing any recommended or optional supplemental applications, which can provide additional information to the underwriter, increasing the chances of securing a faster quote with proper limits.
Final thoughts
Moderating rates, available capacity and a move toward the E&S space highlight the current state of the Construction Insurance market. Data is a powerful tool that can be used by brokers and agents to increase their insured’s chances of qualifying for preferred limits. Underwriters increasingly use data to note minute differences from one submission to another. The softening of the labor market also is helping construction companies meet their clients’ needs.
Carrier competition is fierce, especially for the insureds with clean histories and in markets considered lower risk. Carriers are after the same types of business, which means more challenged markets – such as Automotive – are largely being serviced by the E&S sector where freedom of rate and form provides an array of advantages.
Burns & Wilcox will continue to serve as an important wholesale partner to find solutions to some of your biggest challenges. Our vendor partners, carrier relationships and industry expertise can be invaluable in navigating the market today and tomorrow.
Contributors: Bryant Steele, Regional Vice President, Upper Midwest, Burns & Wilcox; John Dewart, Senior Broker, Casualty, Burns & Wilcox; Steve Bartell, Senior Broker, Casualty, Burns & Wilcox Brokerage; Nicholas Enriquez, Broker, Commercial Insurance, Burns & Wilcox Brokerage
