The construction insurance landscape in 2024 witnessed significant transformations, driven by an influx of new capacity and evolving competitive dynamics, as outlined in a detailed report by specialist re/insurance broker Miller. The report’s comprehensive analysis spans construction lines, professional indemnity, directors’ and officers’ liability, and real estate, highlighting shifts in rates, insurer appetites, and regulatory impacts.
Construction lines experienced a notable softening of rates as new market capacity emerged over the preceding 18 months. This trend was particularly pronounced in project business, fueled by insurers striving to meet growth targets, while established players faced pressure to maintain their market share. Although under normal conditions this would lead to rapid rate softening, the varying underwriting performance across the sector may decelerate this process. Market appetite for construction risks remains robust, with insurers considering a diverse range of projects and crafting coverage solutions tailored to client needs.
In the realm of professional indemnity, the construction market saw an increase in insurer capacity and appetite throughout 2024, fostering competitive pressures that led to a gradual decline in rates. A report from Industry Growth Insights estimated that the global construction insurance market was valued at approximately US$8 billion in 2023, with projections to reach US$12 billion by 2032, reflecting a compound annual growth rate (CAGR) of around 4%. This growth is largely attributed to the rising demand for construction projects and the critical need for effective risk management within these ventures.
Regulatory changes, especially those emanating from the Building Safety Act 2022, significantly influenced insurers’ risk assessments. The Act’s emphasis on the expanded principal designer role and the extension of limitation periods under the Defective Premises Act were pinpointed as pivotal factors shaping underwriting decisions. Insurers have increased their scrutiny of firms’ risk management practices, particularly in light of high-profile contractor insolvencies from 2023. These insolvencies, coupled with broader macroeconomic pressures, have kept financial stability at the forefront of underwriting considerations.
In addition, insurers have shown a heightened interest in the adoption of emerging technologies, such as artificial intelligence, which is increasingly integrated into project design, risk assessment, and operational processes. While these innovations promise to enhance efficiency, they also introduce new exposures, requiring firms to demonstrate robust governance and risk management frameworks.
The directors’ and officers’ liability (D&O) market continued to experience a softening trend in 2024, marking the third consecutive year of declining average rates, as reported by Miller. Rate reductions ranged from 10% to 20%, exerting competitive pressure on insurers to achieve growth targets for 2025. Excess supply relative to demand, coupled with a challenging claims environment, contributed to ongoing rate declines.
Deteriorating macroeconomic conditions and rising insolvencies within the construction sector further complicated the D&O outlook. Regulatory authorities have introduced stricter requirements, adding layers of uncertainty to the market. While some anticipate stabilization of the D&O market by the fourth quarter of 2025, Miller cautions that such predictions remain speculative at this stage.
In the real estate insurance sector, Miller observed that the hard market conditions of previous years began to ease at the close of 2023. The early months of 2024 saw increased competition, additional capacity, and favorable reinsurance renewals, leading to reduced pricing and more lenient terms and conditions. This environment resulted in premium discounts of up to 25%, with competitive pricing expected to persist through 2025. However, the outlook for 2026 and beyond remains uncertain due to recent property losses in North America, which could impact future market conditions.
