What does 2023 hold for the construction insurance market?

What does 2023 hold for the construction insurance market?

What does 2023 hold for the construction insurance market?

19 Jan 2023

The current economic environment is expected to put a strain on the construction insurance market. Here are our expectations and recommendations for successfully navigating the coming months.

How does the current economic landscape impact the construction sector we insure? What can we do to prepare our clients for it?

Did you know more than 6,000 construction companies are expected to go bankrupt in 2023? It is critical that businesses are well-insured, as a claim could significantly impact their ability to stay solvent.

According to the RICS, the cost of construction claims in 2022 increased by 20% over the previous year, resulting in a general decrease in profitability for medium to long-term projects in the soft market. As a result, some markets have exited the sector, lowering competition and raising premium rates. For example, a construction project in August 2022 received a premium rate of 0.35%, compared to 0.10% at the end of 2020.

Is your current Contract Works Insurance (MCV) up-to-date and adequate? Does it reflect the current market trends?

The cost of materials has risen by 17.5% since 2019. According to the BCIS Material Cost Index, the main contributors to this figure are timber and steel, which have increased by 77% and 75%, respectively. While prices appear to have plateaued, we encourage clients to review their contract values to ensure their Contract Works insurance is as precise as possible!

Unfortunately, because global demand for materials is so high, we can expect prices to remain high for the next 12 months. With geopolitical factors such as the Ukraine war and China's zero-covid policy, predicting when these shortages will end can be difficult.

Why should you get a Contractors All Risks (CAR) cover? What does it provide?

It provides coverage for buildings and structures while they are under construction. Property owner policies (commercial or residential) do not cover structures or buildings under construction - making a CAR policy essential for any business!

Policies will usually have options to cover the following aspects of a contract such as:

  • Building materials.

  • Foundations.

  • Temporary structures.

  • Paving, fencing, and outdoor fixtures.

Here are some examples of what is covered by a CAR policy:

  • Damage to contract work resulting from unexpected issues like floods, fires, and explosions.

  • Damage to contractor's machinery or equipment.

  • Piling, demolition, and excavation work issues.

What are the differences between a hired-in plant and an owned plant? Knowing the distinction between both is crucial!

A hired-in plant consists of tools, heavy machinery, and large equipment rented from a supplier. Hired-in plant insurance protects you in the event that a plant is damaged, stolen, or becomes unusable. If something happens to the plant, the client will be obligated to pay the company for the ongoing hiring costs unless a cover extension is placed.

On the other side, an owned plant includes tools and machinery owned by the contractor. Considering the dangerous nature of a construction site, it is primordial to be protected. In addition, severe weather conditions, burglary, and other unpredictable events can put the machinery at risk. Without an owned plant insurance, covering the cost of repairing or replacing machinery puts the company under financial stress.

Summary

2023 will be a challenging year for several businesses! It is vital you undertake a full review of each business and offer adequate cover - to allow construction companies to operate with better financial security.

As an owner-managed independent Lloyd’s Broker with offices in London, Europe, and North America, we strive to create value through an extensive understanding of market trends with a personal and tailored approach. If you need help placing adequate, competitive, and tailored construction insurance, speak to us!

How does the current economic landscape impact the construction sector we insure? What can we do to prepare our clients for it?

Did you know more than 6,000 construction companies are expected to go bankrupt in 2023? It is critical that businesses are well-insured, as a claim could significantly impact their ability to stay solvent.

According to the RICS, the cost of construction claims in 2022 increased by 20% over the previous year, resulting in a general decrease in profitability for medium to long-term projects in the soft market. As a result, some markets have exited the sector, lowering competition and raising premium rates. For example, a construction project in August 2022 received a premium rate of 0.35%, compared to 0.10% at the end of 2020.

Is your current Contract Works Insurance (MCV) up-to-date and adequate? Does it reflect the current market trends?

The cost of materials has risen by 17.5% since 2019. According to the BCIS Material Cost Index, the main contributors to this figure are timber and steel, which have increased by 77% and 75%, respectively. While prices appear to have plateaued, we encourage clients to review their contract values to ensure their Contract Works insurance is as precise as possible!

Unfortunately, because global demand for materials is so high, we can expect prices to remain high for the next 12 months. With geopolitical factors such as the Ukraine war and China's zero-covid policy, predicting when these shortages will end can be difficult.

Why should you get a Contractors All Risks (CAR) cover? What does it provide?

It provides coverage for buildings and structures while they are under construction. Property owner policies (commercial or residential) do not cover structures or buildings under construction - making a CAR policy essential for any business!

Policies will usually have options to cover the following aspects of a contract such as:

  • Building materials.

  • Foundations.

  • Temporary structures.

  • Paving, fencing, and outdoor fixtures.

Here are some examples of what is covered by a CAR policy:

  • Damage to contract work resulting from unexpected issues like floods, fires, and explosions.

  • Damage to contractor's machinery or equipment.

  • Piling, demolition, and excavation work issues.

What are the differences between a hired-in plant and an owned plant? Knowing the distinction between both is crucial!

A hired-in plant consists of tools, heavy machinery, and large equipment rented from a supplier. Hired-in plant insurance protects you in the event that a plant is damaged, stolen, or becomes unusable. If something happens to the plant, the client will be obligated to pay the company for the ongoing hiring costs unless a cover extension is placed.

On the other side, an owned plant includes tools and machinery owned by the contractor. Considering the dangerous nature of a construction site, it is primordial to be protected. In addition, severe weather conditions, burglary, and other unpredictable events can put the machinery at risk. Without an owned plant insurance, covering the cost of repairing or replacing machinery puts the company under financial stress.

Summary

2023 will be a challenging year for several businesses! It is vital you undertake a full review of each business and offer adequate cover - to allow construction companies to operate with better financial security.

As an owner-managed independent Lloyd’s Broker with offices in London, Europe, and North America, we strive to create value through an extensive understanding of market trends with a personal and tailored approach. If you need help placing adequate, competitive, and tailored construction insurance, speak to us!

Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

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40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE



+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

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Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

Canadian Office

Servca Canada Insurance Group Inc
40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE



+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

Privacy Policy

Cookies

Global Headquarters

Servca Group

Dukes House

32-38 Dukes Place

5th Floor

London, EC3A 7LP

United Kingdom


+44 (0) 207 2250000

info@servca.com


Broker at Lloyd’s SLM1389

European Office

Servca Europe

Dragonara Business Centre

Dragonara Road

5th Floor

St Julian’s, STJ 3141

Republic of Malta


+356 (20) 341690

eu@servca.com


Broker at Lloyd’s (Brussels) SLM1883

Canadian Office

Servca Canada Insurance Group Inc
40 King Street West
Suite 2100
Toronto
M5H 3C2
Canada


+1 (647) 846 5555

canada@servca.com


Non-regulated servicing company

Northern Ireland

Servca Northern Ireland
River House Belfast

48-60 High Street

Belfast

BT1 2BE


+44 (0) 2895582000

ni@servca.com


Broker at Lloyd’s SLM1389

© 2024 Servca


Servca Group Ltd is a private limited company registered in England and Wales; Registered Number: 7727494; Registered Office: Dukes House, 32-38 Dukes Place, 5th Floor, London, EC3A 7LP, United Kingdom. Authorised and regulated by the Financial Conduct Authority. Servca European Insurance Brokers Ltd (a private limited company incorporated in Malta and enrolled to act as an insurance broker); Tower Business Centre, Level 3, Tower Street, Swatar, BKR, 4013, Republic of Malta. UK branch office is registered in England and Wales, authorised and regulated by the Financial Conduct Authority. Servca Canada Insurance Group Inc, a private limited company incorporated at 40 King Street West, Suite 2100, Toronto, M5H 3C2, Canada. Servca group of companies are owned and operated by Servca Group Holdings Ltd, a private limited company registered in England & Wales.

Privacy Policy

Cookies