Demand for construction products and environmental professional liability is expected to rise this year as construction activity rebounds from the impact of the COVID-19 pandemic.
After years of market stagnation, carriers are finally raising premiums for contractors’ professional liability coverage, according to a 2022 market update by Chicago-based wholesale brokerage RT Specialty.
That was one of the most important findings of the firm’s update, which examines the latest trends in environmental and construction-related professional liability insurance, according to Joey Nawa, vice president of the environmental and construction professional practice of RT Specialty.
Carriers had pushed fares down to increase market share, Nawa said. But faced with major losses, as well as a general increase in premiums in all areas, the main insurers are turning their backs on the professional liability of contractors.
Market carriers have predicted contractors’ professional liability rates could rise between 2% and 5%, though general economic inflation could push rates up, Nawa said.
“Because of inflation, it can be more expensive to defend a claim. If the cost of defending a claim increases, the cost of purchasing an insurance policy may also increase.
RT Specialty’s update also predicts an increase in claims this year across the basket of policies covered by the update.
In addition to contractors’ professional civil liability, they include pollution civil liability, pollution civil liability, professional civil liability of architects and engineers, protective professional civil liability of owners and professional civil liability of property developers.
Demand for the products is expected to rise this year as construction activity rebounds from the effects of the COVID-19 pandemic.
However, higher activity levels can potentially create greater exposure, Nawa said.
The risks are compounded by the general labor shortage, which could mean that contractors and designers rely on less skilled and less experienced workers requiring increased supervision and tight deadlines. Supply chain challenges, meanwhile, can shorten project lead times.
“The risk manager part of my brain would say that, depending on the particular facts and circumstances of the insured, the value of these coverages can only go up with the economy and job market in their current state,” said Nawa said.
Contractors also face growing environmental responsibilities, especially when regulators focus on pollutants such as PFAS and PFOA, so-called eternal chemicals that don’t break down in nature, Nawa said.
Many project owners are increasingly demanding coverage, he added.
Here’s a look at RT Specialty’s predictions for each line of coverage.
1) Liability of contractors for pollution
New carriers are expected to enter the policy market, which cover pollution conditions resulting from contractual operations carried out by or on behalf of the insured.
The result should be stable rates for companies with clean loss reports.
In 2021, some carriers added exclusions for communicable diseases in addition to existing restrictions on mold and bacteria coverage. But some carriers did not, according to the report.
2) Civil liability for pollution
Demand for the policies has soared as the US economy emerges from the pandemic, according to RT Specialty. The $1 trillion infrastructure bill signed into law last year will only stimulate demand.
Policy terms are unlikely to change in 2022, but some areas may come under closer scrutiny by underwriters. They include industry, hospitality, housing, healthcare and energy.
3) General Liability/Pollution Liability
Combination policies are designed for chemical manufacturers, distributors, waste management facilities and other manufacturers of environmental products such as storage tanks, pressure vessels, pumps, valves and process equipment. pollution control.
The font market tightened in 2021 due to the emergence of new contaminants, increased litigation, costly natural disasters and the overall impact of COVID-19.
Insurers should respond with more exclusive endorsements related to pollutants such as PFAS.
4) General civil liability/Pollution liability of contractors/Professional liability
Combination policies are tailored to the needs of environmental contractors, waste haulers, environmental consultants and oil, gas and energy contractors.
Many carriers have taken a conservative underwriting approach to policies, according to RT Specialty.
And this should continue until 2022.
Premiums, meanwhile, could increase by 5% to 25%, depending on the degree of exposure and line of coverage, RT Specialty added.
5) Professional Liability of Architects and Engineers
Rates had been falling for years for professional liability for architects and engineers. While some careers have started to increase premiums in certain segments, the market as a whole is expected to remain stable, according to RT Specialty.
Areas where the market may continue to tighten include project-specific professional coverage, coverage extensions for cyber liability and privacy, and businesses specializing in geotechnical, structural, and civil engineering.
Carriers are also hesitant when it comes to companies active in residential design, particularly for condominiums and single-family homes, Nawa said.
“It is really difficult for these companies to meet the very high demands of their customers and this very often leads to claims under their insurance policies.”
6) Owners Personal Protection Indemnity
The policies have gained popularity in 2021 as a lower-cost alternative to professional liability policies for insuring against catastrophic errors in the performance of design professionals and other professionals, according to RT Specialty.
The company expects the product to continue to generate interest this year as markets tighten and rates rise for traditional professional liability products.
Pricing for homeowners’ protective personal indemnity policies should remain competitive, the company added.
7) Professional liability of property developers
The policies combine features of professional liability insurance for design professionals, contractors, real estate professionals and homeowners, according to RT Specialty.
Driving demand in 2022 could be a proliferation of demands from lenders and investors seeking to mitigate risk.
Shoppers, however, should be aware of coverage disparities between policies, RT Specialty said. The company also suggested paying attention to how carriers respond to complaints.
Like businesses in many other industries, insurers can often be understaffed, Nawa said.
“The turnover we’ve seen has really slowed things down in terms of service.”
The slowdown is, in many cases, impacting claims but also proof of insurance, which contractors typically need before setting foot on a job site, Nawa said. &