Construction insurance market trends: Asia

Construction All Risks

Construction All Risks

Singapore/Regional markets

Rating: 1/10

Whilst some international insurers sought to talk the market up towards the end of 2017 citing the US hurricane losses, this proved to be a forlorn hope. CAR pricing continues to fall for small to medium sized building projects as markets seek to counteract the even worse premium erosions in the property market. A feature of the current CAR market is a lack of obvious leaders as different insurers exhibit aggressive pricing practices at different times depending on budget pressures.

Hong Kong/Macau markets

Rating: 3/10

Rates have stabilised and reductions are few and far between. The region was affected by major losses during 2017, with several typhoons and a major fire loss in Macau. We are yet to see upward pressure on rates as there is still significant competition for market share. Some insurers appear to have lost underwriting authority and are required to refer risks which sit outside their underwriting authority to global HQs – which invariably results in higher pricing and more restrictive coverage.

Underwriters have tightened coverage with general reduction in sub-limits offered under policy extensions.

Construction Liability

Construction Liability

Singapore/Regional Markets

Claims experience in this class in Singapore continues its historically good performance due to comparatively tight regulatory environment. As such, pricing remains extremely competitive even on heavy civil engineering projects involving deep excavation and tunnelling works.

Hong Kong/Macau Markets

Project owners and contractors generally buy low limits of indemnity hence capacities are rarely maximised for projects and thus the market will remain competitive in the mid to long term.

Professional Indemnity

Professional Indemnity

Singapore/Regional markets

Rating 2/10

The construction PI market in Singapore has been an annual consultant market.

Contractors, being predominantly Asian in this market, rarely purchase PI unless imposed by contract.  Some recent infrastructure projects have resulted in single project placements but not to the extent of impacting market pricing in any meaningful manner.

Hong Kong/Macau markets

Rating 1/10

Low loss ratio and ample capacity so market remains very competitive.

The local market has been unaffected by the losses and there continues to be significant appetite and placements can be completed without much difficulties.

Motor, Plant & Equipment

Motor, Plant & Equipment

Singapore/Regional markets

Rating 2/10

Motor premiums rates are comparatively stable whilst CPE continues to drop.

The motor market has been stable for some years with insurers rotating in and out of the market in periodic bouts of top-line underwriting. Competitive pressures limit insurers’ pricing power and this segment oscillates between marginal profitability and loss. The plant and equipment segment is focussed on fleet covers for specialist equipment leasing companies and market pressures have forced pricing progressively downwards over the years. Due to the nature of the losses, accounts tend to be either profitable or catastrophically loss making again resulting in insurers cycling in and out of this segment.

Hong Kong/Macau markets

Rating 3/10

These classes of insurance are claims driven so varies depending on risks but generally stable.

Competitive pressures limit insurers’ pricing power for the motor line of business. It is Unlikely that there will be any major changes in trend and market conditions.

A lack of players for standalone plant and equipment cover and contractors tend to arrange on annual basis with other general covers required for their business.

Marine

Marine

Singapore/Regional markets

Market capacity exceeds demand by several orders of magnitude even for highly technical project risks unless very high DSU limits are sought. Under such circumstances pricing levels can be expected to remain at current low levels.

Hong Kong/Macau markets

Demand for insurance under the Marine class of business is generally stable and there is ample local capacity at competitive pricing.

D&O Liability

D&O Liability

Singapore/Regional markets

Rating 2/10

This class of insurance has very low visibility in the construction industry. In general, D&O type claims do not feature greatly in the Singapore landscape even amongst major corporates. There are therefore no drivers of change in this market to counteract abundant capacity.

Hong Kong/Macau markets

Rating 1/10

There is generally low project driven demand for D&O cover and purchases are affected at corporate level if the companies are publicly listed.