The effects of the past 12 months on the insurance market mean that a climate of caution is affecting the construction industry at all levels, warns Gallagher Head of Construction - Australia and Asia Roger Irvine in the most recent Gallagher Market Overview Report..
Along with the fallout from fires and natural catastrophes, mechanical failures such as the collapse of the Ituango dam in Brazil ‒ which has hit BHP with an estimated $7.2 billion bill ‒ have contributed to insurance losses.
As a result, “A number of London insurers [are] exiting construction or scaling back their offerings, reducing available capacity; also local insurers [are] redefining their risk appetite,” Irvine says.
“For a construction insurance placement today, the perceived risk exposure and past history dictate market response. Insurers are differentiating between contractors on the same project, where they perceive differing qualities of risk management, and in some cases not offering terms at all.”
Irvine also notes that the mere presence of ACP cladding can trigger claims for remediation by owners and body corporates against contractors, and in turn by contractors against their consultants.
While one local construction lawyer is predicting Australia will follow the United Kingdom with the government funding the removal of combustible cladding from buildings at risk, there are many times more buildings at risk in our state capitals than in Britain.
“It is essential for companies with cladding risk exposure, whether as contractor, supplier or consultant, to conduct a thorough audit of their historical projects and provide their professional indemnity insurers with notification prior to renewal,” Irvine advises.
Premiums are going up, deductibles are increasing and coverage enhancements are more difficult to achieve.
- Quality of underwriting submissions is essential as underwriters seek to understand client risk before committing capital.
- A focused marketing campaign is a must. Underwriters are ignoring or declining submissions they don’t understand.
See Sarah Lyons, Chief Executive – Australia, and Steve White, Head of Marketing & Communications, APAC, introduce the report.
How to access our first half-year 2019 Market Overview Report
Access the full report here. This digital version also has a full PDF version available for download and printing.