In Asia, pricing generally rose during the first half of 2020 in key markets, including Singapore and Hong Kong
The global construction industry at mid-year has faced extraordinary circumstances that have created unbelievable uncertainty across all segments of the business, finds Willis Towers Watson in its Global Construction Rate and Trend Update.
The full impacts of COVID-19 globally are still manifesting themselves, with impacts ranging from project cancelations or delays, financing issues, supply chain instability, increased site safety requirements, new ways of working and margin pressure.
The insurance market responses to the pandemic crisis have not just been in terms of the rate increases but in revalidation of previously quoted project terms, imposition of specific COVID-19 exclusions, difficult negotiations for policy extensions and overall increased underwriting scrutiny.
In addition to the impacts of the pandemic crisis, current civil and political unrest across the world is focusing attention around exclusions for riot and associated risks.
In Asia, pricing generally rose during the first half of 2020 in key markets, including Singapore and Hong Kong. A key driver is the continued tightening of underwriting guidelines, as these regional markets align to their global management directives to increase rates and improve underwriting results. Capacities and breath of policy coverage offered by underwriters are increasingly scrutinised as a result of COVID-19 and will likely to be reduced in the second half of 2020.
There are some exceptions in certain local markets like Vietnam, Indonesia and Taiwan, where strong appetite still exists for small to medium valued domestic projects, and in China where significant capacities are readily available for local and overseas Chinese-interest projects.
The pandemic situation undoubtedly is having a profound impact on the construction insurance market and actions taken are wide ranging from imposing infectious diseases exclusions and administrating works cessation conditions, to seeking project period extensions and revalidations of quotation terms.
The markets appear to still be in the transition, and Willis Towers Watson anticipates the hardening trend and curtailment of projects to persist in the immediate future. This trajectory should start to plateau and stabilise at a ‘new’ equilibrium towards the end of the year as economies reopen gradually across the region.
Australian Construction “All Risks” (CAR) insurers are looking at rating and deductible increases with a corresponding reduction in available capacity/line size. Insurers are closely interrogating the appropriateness of Limits of Liability and corresponding Sub-Limits.
Previously available coverage enhancements such as Guarantee Maintenance and Design Exclusion (LEG3 or DE5) are either no longer available or are only offered with increased rating and deductibles.
Casualty markets are also reviewing their appetite for construction risks with certain insurers reducing their primary capacity deployment for the sector and looking at increases in rating and deductibles.
Of particular note, is the increasing Worker to Worker deductibles being mandated by all insurers. This trend is also being experienced in the Excess Liability line.
The Professional Indemnity market is continuing to be challenged with large rate increases being experienced across the board.
Previously available extensions for loss mitigation and rectification costs, express fitness for purpose and related parties are being scrutinised by insurers with levels of coverage being reduced or coverage being removed entirely.
Notwithstanding the impacts of COVID-19, it is anticipated that these trends will continue for the remainder of the year and into 2021.
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