Construction All Risk
The local construction sector is starting to show signs of growth, with both building and commercial developments in the pipeline.
The international presence of Spanish contractors continues to increase, especially in USA and LatAm. Growth in recent years has seen Spanish construction insurers develop their business models and underwriting appetite to support clients. This has developed the market locally, enriched the insurance coverage they provide and has made it possible for them to compete with insurers worldwide. Indeed some of the major players are underwriting construction risks for non-Spanish clients, making use of their capacities and capabilities to grow their portfolios.
Despite some large losses during 2017, the loss experience is good.
Additionally, insurer appetite remains high. Only in some natural catastrophe prone locations has there been any impact on capacity.
The construction liability market continues to soften with premium rates on heavy civil engineering works experiencing the most drastic reduction.
There is sufficient capacity and appetite to meet the needs of all single project. This has driven prices to get down. Exceptions may be experienced for higher risk projects or in exposed regions – in these circumstances rates may be slightly higher.
Annual policies have suffered a fierce competition in last year renewals. This has keep rates low and coverage broad.
Employers Liability of indemnity limits are higher due to new local authorities’ scales. It has been generally increased from €600k to €1m in order to meet this need. This has been achieved without any premium increase.
Although there has been an increase in the number of claims during the last year, insurers continue to have a strong appetite to underwrite this class of insurance.
New insurers have begun underwriting single project PI, increasing the capacity available. This, combined with competition among existing market participants for retention of market share, is expected to continue the downward impact on prices.
While soft market conditions have been driven by new capacity and increased competition, one key dynamic for clients to monitor is the depth and experience of the carriers’ claims personnel. With so much movement within the industry sector, the depth and quality of claims resources has been stretched. Given the severity of the average professional claim compared to most other lines of coverage, the claims adjustment process can become quite contentious if not managed appropriately.
Motor, Plant & Equipment
During recent years the motor insurance sector is showing signs of hardening. Capacity remains but fewer insurers are willing to compete aggressively for certain motor programmes.
From a Construction Plant and Equipment (CPE) perspective, overcapacity remains. Rates are being kept low with downward trend. Loss experience remains behaving very good.
Project cargo and cargo delay in start-up (DSU) terms are at their most competitive but unlike other classes of insurance, pricing appears to have stabilised and further reductions have not been offered by the market.
Marine has remained profitable despite the competitive terms compared to the other general marine lines of business.
The loss ratio has continued to increase compared to the previous year; premiums have risen too.
The reduction of capacity last year, as a result of the ACE/CHUBB merger, has already been corrected by new entrants. Despite the additional capacity, the high loss ratio means that premiums have been increasing for this class of insurance.