Engineering cover struggles as construction falls flat
Swiss Re says engineering insurance premium growth has continued to stall due to depressed construction spending and poor underwriting performance.
Global premium has fallen flat in recent years at $US21 billion ($27.76 billion), or about 3% of all commercial insurance premium.
Construction spending as a percentage of GDP is down in many advanced economies compared with its pre-financial-crisis peak, with emerging markets slowly emerging from recession.
Underwriting performance has deteriorated due to reduced quality control. Loss ratios and claims have risen in some construction sectors, which has depressed insurance pricing.
Replacement of ageing infrastructure and the move to renewable energy projects should sustain engineering insurance demand, Swiss Re says.
The short-term cyclical boost in economic activity should stimulate construction, but this may not lift premium growth.
Increasing use of digital technology in construction may spur improvements in monitoring, mitigation and risk management, but could also create cyber risks.
This may bring more severe claims, even if frequency falls, Swiss Re says.