Obtaining insurance for construction industry risks is going to be more difficult over the next year. That's the consensus of a panel of insurance industry executives that was featured at the recent Construction Risk Management Conference held in Seattle, Washington on November 10-13. This conference is produced annually by the International Risk Management Institute. Appearing on the panel were: Brian Cooper, senior managing director for construction at Arthur J. Gallagher & Co.; Gary Kaplan, president, North America Construction AXA XL, and; Jeff Lamb, chief operating officer at Markel Assurance.

There was general agreement from all panel members that the insurance market for construction risks has been changing since the first of July 2019. These insurance executives see that the market is becoming less and less friendly to clients. They noted that soft markets, one that we are exiting, last longer than hard, or adverse, market conditions do. The construction industry has been in a soft, favorable insurance market since 2003. Rates over the past 5 years have been reduced by 2.5 percent on the average, but in the last year have increased by an average of 4 percent for all clients and 5.5 percent on the average for those in the construction industry. They advised that on renewal of insurance coverage, customers may see big increases in their insurance premiums, which reflect the changing insurance market. They encouraged contractors in the audience (and outside of it, too) to start pricing the anticipated increases into their estimates for future work.

As the insurance market is tightening, renewals will be, and currently are being, highly scrutinized as the carriers do not want to insure marginal risks. In a hard market, underwriters underwrite. They would rather throw the baby out with the bath water than take a hit by insuring a questionable risk. Insurance carriers are now looking at those risks where they can place their capital, so some insureds may be the losers in this transition.

Also, as the market becomes harder, insurance carriers are looking at the claims' history of each client. One (claim) and done seems to be the trend as the carriers prepare for an economic downturn. This was also the opinion of a few large contractors attending this conference as well, but no one felt that the dip in economic activity would be that deep when it does come.

Some notes about individual insurance lines:

• Workers' compensation and pollution coverage are stable and profitable for the insurance industry currently. Availability of these lines is good.
• Auto (distracted driving) and property (wood frame) insurance are experiencing losses, and property lines are the biggest concern right now.
• Coverage for cyber security is relatively inexpensive, but it is expected to increase in price as the claims start to be made to insurance carriers.
• Excess lines have changed the most with large premium increases as the insurance industry has sustained huge losses due to weather events. The availability for this line is constricting.

Some advice offered to insurance buyers by these insurance executives on how to weather these impending headwinds are:

• Get close with your insurance broker. Relationships are always important but vital and critical during an insurance market constriction. Good brokers come through for their clients, and the weaker ones are less likely to deliver for them.
• Get ahead of the insurance renewal by meeting with your broker now.
• Best in class contractors do not get benefits of a soft market but do in a hard market: Be the best you can be....always.
• Track record counts. Be prepared to demonstrate this to both your broker and insurance carrier.
• Look at retention of some risks and anticipate the cost for retaining these risks rather than buying insurance.
• Be prepared to explain the reason for a claim and demonstrate how you altered your firm to ensure that the condition for that claim will not occur again.

Although the insurance market is tightening, it is not a crisis. Planning for and anticipating some difficulties will greatly aid you and your firm.

An insurance update will be presented on March 4 during the 2020 EIMA Annual Meeting by Dave Dolnick of Dolnick Risk Advisors. Mr. Dolnick is formerly the risk manager of The Brady Companies, a major wall and ceiling contractor in Southern California. He will provide information on the current insurance market conditions and what subcontractors can do to sustain themselves in a difficult market.