If you purchase construction insurance to help protect your business – whether you’re a builder or contractor – this insurance market update is for you.
Check out our video with Marsh Pacific’s construction leader and expert Maarten van Haaps, who shares key highlights on the Australian construction market, including:
- Premium impacts
- Coverage and underwriting trends
- Some challenging areas
- Tips on how you can achieve the best renewal results.
This insurance market update is part of a bigger report that we publish once a year, which covers a wide range of insurance types including liability, property and much more – if you’re interested in reading the full Australian Mid-Year Insurance Market Update for 2023, you can download it after the video and transcript.
Generally speaking, although insurance premium increases have started to moderate, Australian market conditions for construction insurance have been challenging for the first part of 2023, particularly for larger contractors, as some insurers reduced their capacity in certain risk areas.
For smaller businesses, things are looking more positive in the construction professional indemnity insurance space, with a potential for lower insurance premiums in the future. Insurers are keen and competing for smaller contractors that pose lower risk, particularly those not heavily involved in high-rise residential projects.
What could this mean for your business? Let’s take a closer look.
Transcript
The Australian construction insurance market has experienced significant changes in recent years.
Premium trend: Premiums continue to increase across property and liability classes, and capacity became more limited, leading to a more challenging environment for insurance buyers in the construction sector. The first half of 2023 saw premiums increase by 5-10%, which reflects a moderation compared to last year.
Insurer capacity and appetite: For contract works insurance, overall market capacity reduced as a number of global insurers exited the market. For design and construct professional indemnity, insurer competition increased for smaller contractors who pose lower risk. On the flipside, larger contractors are still facing challenging market conditions including limited capacity, restrictive terms, and higher premiums.
Key coverage and underwriting trends
Nat Cat: Insurers are starting to place sub-limits on Nat Cat cover in high risk areas such as cyclone-prone North West Shelf of WA, and heavy rainfall regions in Queensland. To bridge this Nat Cat coverage gap, clients have turned to alternative risk transfer options such as parametric solutions for more tailored protection against weather exposures.
ESG: Some insurers have exited or restricted participation in certain risks due to ESG concerns, while actively seeking quality risks in less contentious areas like hydro and high-rise projects.
Looking ahead: As the market rebalances, we expect insurers to shift their focus towards risk selection and differentiation. In seeking a favourable renewal outcome, it’s essential to work closely with your broker to develop a methodical risk transfer strategy and demonstrate a proactive approach to risk reduction.
Download report: For more insights on the Australian construction market or details on other insurance classes, download our full report today.
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