JLT specialty warns contractors face rise in premiums as construction market hardens
03 December 2018
- JLT Specialty’s Construction Team warns of potential significant increase in premiums for professional indemnity insurance
JLT Specialty, the specialist insurance broker and risk consultant, is warning that the construction industry could face a significant increase in premiums for professional indemnity (PI) insurance as the market begins to harden.
For around fifteen years, design and construct (D&C) contractors have benefitted from an abundance of affordable PI insurance, resulting in low premiums and wide coverage. However, a number of challenges to the market - including uncertainty in relation to cladding systems as a result of the Grenfell fire and greater regulatory scrutiny – have resulted in an increasing number of insurers scaling back on capacity or withdrawing from the PI insurance market entirely.
With many contractors preparing to embark on their 2019 renewal process, this reduction in market capacity could have significant implications for premiums and coverage.
JLT Specialty’s Construction Team is advising contractors to speak to their brokers well ahead of their renewal date to see where there may be innovations or alternatives to existing cover. In addition, as insurers now need additional time and information to progress any renewals, contractors should engage with them as early in the process as possible.
Main contractors are also encouraged to check their supply chain as the changing market conditions will result in smaller suppliers struggling to obtain adequate insurance cover. An imbalance of liability throughout the supply chain can result in contractors incurring huge liabilities for error and omissions made by suppliers. Back to back contracts are a solution but these are not always commercially achievable.
Tim Smith, CEO of JLT Specialty’s Construction Team, said: ‘The market for PI insurance has been hardening over the last year, but it is only in the last few months that this has intensified. Contractors have enjoyed lower premiums and greater capacity of PI insurance cover for many years, and so I think many could face a shock when they come to renew. This may also prove problematic in negotiations with project owners who may still expect PI insurance to be cheap and freely available.
‘My advice to contractors would be to engage with their brokers and insurers as early as possible, and not wait until their renewal period as they may have done in previous years. Although changes to the market produce a number of challenges, brokers will always look for opportunities to create innovative solutions and alleviate cost increases wherever possible.’
- This document is not legal advice and is intended only to highlight general issues relating to its subject matter. Whilst every effort has been made to ensure the accuracy of the content of this document, no JLT entity accepts any responsibility for any error, or omission or deficiency.
- JLT Specialty’s Construction team is the UK’s largest team of construction broking specialists with over 370 experts globally. Read more about the team here.
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Group PR Manager, JLT Group
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About Jardine Lloyd Thompson
Jardine Lloyd Thompson is one of the world’s leading providers of insurance, reinsurance and employee benefits related advice, brokerage and associated services. JLT’s client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.
JLT is quoted on the London Stock Exchange and owns offices in more than 40 territories with over 10,000 employees.
Supported by the JLT International Network, it offers risk management and employee benefit solutions in 135 countries. For further information about JLT, please visit our website www.jlt.com and follow us on LinkedIn at JLT Group and Twitter @JLTGroup.
For further information about JLT, please visit our website www.jlt.com.
About JLT Specialty
JLT Specialty Limited is a specialist insurance broker and risk consultant, providing market leading industry knowledge and expertise in specialist fields to some of the world's largest companies.
For further information about JLT Specialty, visit our website www.jltspecialty.com.