Greater competition following new capacity entering the market and improvements in insurers’ profitability have driven an easing in overall rate increases across the construction sector, WTW says in a mid-year update.

Insurers have remediated portfolios and are looking to grow within the sector, contributing to many clients experiencing more positive outcomes than expected at renewals, the report says.

Rate moves for contract works, construction liability, and design and construction professional indemnity insurances have ranged from flat to 15% for good risks.

Nevertheless, insurers are concerned about materials and labour inflation, particularly impacts on the ongoing solvency of construction companies.

“As a result, insurers are requesting greater detail around clients’ financial position, their contracting regime and how they are mitigating against inflationary pressures,” WTW says. “Insurers are looking more favourably on clients with a clear narrative on how they are dealing with these challenges.”

Insurers remain cautious around natural catastrophes and projects that could be significantly impacted by weather events, such as civil works in northern NSW and Queensland that are susceptible to flood or heavy rain, or large-scale solar farms with hail exposure.

“We are seeing insurers now increasing nat cat excesses, imposing sub-limits for nat cat perils, and restricting cover for open trenches, unsealed roads, and the like,” the report says.

General contractors have experienced the most easing, with rating increases moderating and in some cases plateauing, while competition from the local market and from London and other overseas markets has increased for clients viewed favourably.

In construction third party liability, a general easing of rate increases has continued, while insurers are still focused on worker-to-worker claim impacts.

“Claims costs and inflation continues to be a significant issue with legal and investigation costs leading the way and the levels of quantum to rectify damaged property increasing,” WTW says.

Additional primary and excess capacity has entered the market and more capacity is set to arrive in the second half, with renewed interest for Australian risks mainly coming from the London and Lloyd's market.

Conditions for the design and construction professional indemnity market generally eased during the first half, but with some difficult areas persisting.

“There are still sectors of the industry that are more challenging than others, with high rise residential, hospitals/health care, renewable energy, waste to energy, and large-scale infrastructure projects remaining difficult to source adequate PI coverage,” WTW says.