Global broker Marsh believes a professional indemnity (PI) “perfect storm” is brewing that could leave companies in the UK architectural, engineering and construction industries underinsured and facing increasing risks.

In a survey of UK consultants and contractors, Marsh has found 56% have experienced increasing litigation against them and 25% say the size of the claims is increasing.

Despite the growing risks, the survey also found two-thirds don’t have a dedicated risk manager while a third don’t have risk management procedures in place. Added to this is the effect of economic conditions on the sector and increased competition for work.

Marsh Senior Vice President John Doe says there is no doubt PI premiums will go up and consultants need to be ready.

“Professional indemnity insurance is rated on work that’s been done,” he said. “So you could end up with engineers having less income, but with their risk being rated on what’s been done in the past.

“That gets you into the nasty situation of reducing income but increasing insurance costs at a time of potentially increasing risk. If that happens in the future it’s the wrong combination, so you get the perfect storm.”