Contractors nationwide once again find themselves in a growth industry in these post-recession years. As the construction industry thrives, so too does the construction insurance market, where rates continue to be competitive and insureds are learning to capitalize on new training and technologies to mitigate risks. If the industry can attract enough new skilled employees and the economy stays strong, market forecasters suggest that construction and the many types of insurance that support it, including General Liability, Workers' Compensation, Environmental and Cyber coverage, should continue to remain in high demand. |

The lay of the land

While pricing in many other insurance markets remains soft, construction insurance is an exception, according to IRMI Editorial Director Ann Hickman. Most contractors, Hickman notes, are seeing price increases of 10% to 15% overall. This trend, she explains, is due to increases on Commercial Auto and General Liability insurance, "driven by the spike in auto accidents and concerns about construction defect claims in areas hit hard by last year's hurricanes." Timothy Kania views the current construction insurance market as ever-evolving. "A steady rise in the scope, complexity, duration and size of commercial and industrial projects, coupled with multi-faceted contractual partnerships and exposures, is becoming the norm," says Kania, the global head of Energy and Construction & U.S. Property at Aspen Insurance. However, as always, new capacity coming into the marketplace has had its effect. There are nuances within the construction market based on line of business and geography, adds Kelly Kinzer, executive vice president and America for Willis Towers Watson. "Our current rate forecast for this particular class of business is -5% to -10%," says Kinzer. "Continued deterioration in rates for this particular class of business are stemming from an abundance of capacity, as several new aggressive markets have entered this space domestically in the past few years." She adds that deteriorating underwriting results have continued to put significant upward pressure on auto rates, and that contractors and subcontractors historically experience auto losses. What's more, the builder's risk market may soften in the near future, Kinzer says. "Over the past several months, the London marketplace has absorbed several billions of dollars' worth of builder's risk losses. One of those losses, the Ituango Dam claim, is currently estimated at $1.2B and could grow to $1.8B, depending on the severity of the delay in completion loss. We're waiting to see how these large losses may or may not impact overall market conditions in North America." The disaster Kinzer refers to is the $4B Ituango hydroelectric project in Colombia, which was hit by two landslides in less than a month back in May and forced the evacuation of hundreds of construction workers. |

Construction's Achilles Heel

The single biggest risk facing the building industry is the aging of the current workforce paired with a lack of younger, skilled laborers. "There's plenty of work out there," says Wrap Up Insurance Solutions Senior Vice President Brian Billhartz. "It's just a matter of finding the right labor force." Slips, trips, falls, sprains and strains remain the most common construction site injuries. "Studies have shown new workers are more than three times as likely to be injured on a job as experienced workers," says Scott Grieco, senior vice president, and president, middle market at The Hanover Insurance Group. "With the demand for construction workers at an all-time high, the careful training and onboarding of new workers must be stressed." Environmental exposures also are top-of-mind for agents, brokers and carriers who service the construction insurance market. Two of the most common environmental exposures, according to Denis McCarthy, vice president of Global Environmental Lines at Aspen Insurance, are water intrusion and soil contamination. "If water intrusion occurs, a response plan is equally important to preventing mold contamination and project delays," McCarthy says. An essential element of a water damage prevention plan, he adds, is establishing a water-tight building envelope prior to proceeding with any interior work. Regarding soil health, any urban or industrial construction project warrants environmental site assessments to provide safety and mitigation guidance. "Use of a Soil Management Plan (SMP) helps reduce liabilities related to the reuse of contaminated soil at this or other development sites," McCarthy adds. "The SMP alerts contractors of potential contaminants, identifies visual and odor flags, and lays out next steps." Sarah Wirtz with Risk Placement Services Inc., says both contractor and subcontractors should carry pollution liability coverage as, "there's been an increase in the frequency and severity of environmental claims," says Wirtz, RPS' Chicago-based vice president, casualty manager and national environmental practice leader. RPS shares examples of past claims with its construction policyholders to illustrate coverage needs and risks. One such example RPS-backed building project in which the contractor failed to properly and thoroughly remove materials that contained asbestos. The result was a soil contamination and cleanup claim that cost $2.3 million. Billhartz adds that post-construction exposures are of equal concern. "People are filing claims over water, sound [or] anything settling," he says. "That's still one of the bigger exposures on the liability side." Grieco at The Hanover says agents and carriers alike must be more proactive than ever about working with builders to assess their exposures and help them become better risks through safety training and management programs: "Agents can act as facilitators by asking the right questions to help their clients think about their risks and how to control them. Doing risk assessments, such as walk-throughs, and reviews of business operations, job sites, and financial reports can help alert clients to potential exposures." |

In tech we trust

Fresh from InsureTech Connect 2018, Gary Kaplan with AXA XL is excited about the power of technology tools to mitigate construction site risks. AXA XL has grown its wrap-up construction insurance business by as much as 45% annually in recent years, according to Kaplan. "The amount of digitalization that's coming into an individual project is accelerating, and we're seeing significant opportunities and positive impact on our contractors," says Kaplan, president of AXA XL's construction division. He likes what he's seeing with regard to wearables and other worksite monitoring devices for workers, as well as new building applications that make use of robotics and artificial intelligence. Kaplan predicts that the expansion of InsurTech in construction will attract the next generation of skilled laborers to construction. "The speed with which InsurTech is being implemented is a game-changer," he says. "It will impact loss ratios as well as the overall quality of construction projects." |

How to stand out

Specialization is essential for agents and brokers who want to succeed to bolster their current success in the construction market. "For agents, demonstrating their expertise in helping their clients adapt to new challenges and anticipating their insurance needs as their operations change are great ways to add value," says Grieco. "For agents, this makes it even more important to be engaged with their construction clients to help them address and respond to these pressures." Billhartz says expeditious underwriting and claims operations also further success in the construction market: "The ability to adjudicate and handle claims quickly and fairly is what folks look at in their carriers." See also: 10 steps to mitigating drone risks on construction sites