Australian Construction Insurance Market Update, Q1 2024


Discover positive shifts in the construction insurance market—improved profitability and new international players drive competition. Brokers report exceeding expectations in 2023, with trends set to continue in 2024. Construction All Risk (CAR) market sees increased competition, especially for quality projects, while Third Party Liability (TPL) stabilizes. Design & Construct Professional Indemnity (D&C PI) market improves with additional capacity. Insurers focus on risk mitigation, offering -5% to +5% rate changes.

Improved insurer profitability and new capacity from international underwriters are leading to better conditions in the Construction insurance market. Generally speaking, conditions in the Construction insurance market improved throughout 2023, with multiple brokers reporting better than expected results for their construction clients.

The good news is that feedback from brokers and insurers is this trend is set to continue for the balance of 2024. New insurers (namely overseas domiciled insurers) are entering the market and looking to grow their construction client base after returning to profitability. The end result is a more competitive environment that will likely put further downward pressure on premium rates in the future.

Construction All Risk

The Construction All Risk (CAR) market is showing increased competition for quality projects; however, insurers remain cautious with clients/projects that are exposed to Natural Catastrophe (Nat Cat) perils. In many cases, insurers are still imposing higher excesses, restricting cover, and requiring higher premiums for Nat Cat exposed accounts.

Insurers also remain heavily focused on water damage claims, identified as one of the top causes of loss on construction projects, in relation to the frequency and value of incidents. Organisations that can demonstrate effective risk mitigation strategies to manage these exposures will be looked upon favourably and will likely receive preferential terms.

Overall, the CAR market's policy terms and conditions have remained relatively static. Several brokers anticipate that conditions will continue to improve, subject to unforeseen events (e.g., Nat Cat losses), in the first half of 2024 and that insurers will offer nominal rate changes of -5% (or more) to +5%.

Third Party Liability

Third Party Liability (TPL) is another area that local insurers are keen to grow, with additional interest from the London market. Premiums had been on the rise due to increasing litigation costs and claim frequency, but there is now a general acceptance in the market that premiums and deductible levels are under control, which includes Worker to Worker / Injury to Contractor claims.  More insurers are looking at longer term loss records (which have the most significant impact on renewal rating) and a client's risk management and H&S protocols.

On a positive note, insurers' appetite for excess liability business within the local and overseas markets has improved and several brokers are anticipating relatively flat conditions moving forward. Much like the CAR market, a number of brokers have suggested that any movements in insurers' ratings will be fairly negligible at -5% to +5%.

Design & Construct Professional Indemnity

The Design & Construct Professional Indemnity (D&C PI) market has been one of the most distressed segments of the market in recent years, particularly for larger contractors involved in high-rise residential projects. In late 2019, average pricing increases peaked at a whopping +50% to +100%.

Fortunately, the influx of new insurers and additional capacity in the market, including insurers who previously only offered excess capacity but are now deploying primary capacity, has quickly turned things around. Conditions are expected to be far more favourable going forward, with some brokers suggesting that organisations with effective risk mitigation controls and clean loss records may realise premium discounts at renewal time of 5% - 10%, plus.

Looking Ahead

The outlook for Construction companies is generally far more optimistic than in previous years. Feedback from brokers is that insurers are adopting more personalised underwriting strategies and evaluating clients individually instead of simply imposing blanket rating increases across their portfolios.

The market is by no means reversing course entirely, but organisations that can demonstrate strong risk mitigation controls and a clear narrative on how they are dealing with the various risks/hazards specific to the construction sector will be looked at more favourably by insurers.

This highlights the importance of your insurance broker's role in the current market. As your spokesperson and exclusive representative in the market, their ability to collaborate with you and execute 'go-to-market' strategies that successfully convey your key messaging to insurers and present you as an attractive, well-managed risk is key to attracting the most competitive capacity from insurers.

Ultimately, insurance buyers need to be proactive and work with their broker to ensure they are positioned to take full advantage of the improving market conditions. However, this is contingent on having the right broker in place – one with the experience, knowledge, and technical proficiency necessary to deliver the best the market has to offer, not only in terms of pricing but coverage.

A carefully construction broker RFP (request for proposal) tender exercise can be an extraordinarily effective and uncomplicated solution to achieve this. It enables you to examine and compare, in detail, the service proposition of a wide selection of specialist brokers in an open and transparent environment so that you can make a fully informed decision on which broker is best suited to represent you in the market.

Hear what they have to say about the adequacy of your current policy coverage, the risk management initiatives they would provide you (and why), their claims management protocols, and the marketing strategies they would adopt for you specifically, among other things.

And it's important to remember that you do not have to change from your incumbent broker to benefit from running an RFP exercise. Contact us to find out about The Lion Partnership's unique RFP tender service and how it can help you.

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