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29 April 2019
The construction industry and recycling and waste management operators face surging premiums and challenges obtaining cover, Honan warns in a quarterly market update.
CEO Australia and New Zealand Andrew Fluitsma says difficult purchasing conditions that started in late 2017 have continued and there is a lack of local underwriting appetite and capacity for some property risks.
“This has forced a return to mature underwriting markets, such as London, to obtain capacity – albeit at reduced levels and significant increase in pricing, coupled with reduced cover,” he says.
“In some cases businesses have elected to self-insure their risks either partially or completely as a result of these factors.”
Insurers are re-engineering portfolios and applying exclusionary language around cladding and aluminium composite material exposures following London’s Grenfell Tower disaster and a recent Victorian court case related to the Lacrosse building fire in Melbourne.
The case, which identified the liability of consultants including building surveyors, architects and fire engineers for failure to exercise reasonable care, is causing “huge concern” for construction industry professional indemnity renewals due in the second half, Honan says.
The broker warns it will not be uncommon to see a doubling of premiums and a majority of insurers excluding cladding-related exposures or offering a minor write-back for legal defence costs.
Honan Head of Broking and Carrier Management Travis Wendt says organisations should submit proposal forms well in advance of renewal dates, while lower-risk businesses will continue to attract competition from insurers.
Organisations that present excellent claims histories and work on risk improvement and management will be in strong negotiating positions to limit pricing gains, he says.
The report also notes directors’ and officers’ cover for shareholder class action protection continues to provide “purchasing challenges”.