The insurance market for construction professionals remains “soft”. We see strong appetite and deployment of more capital in this sector, from Lloyd’s as well as local and other international insurers.
Insurers are continuing to be aggressive in the face of strong competition evidenced by rate reductions of between 10 to 15 per cent on offer for claims free policies where there has been no material deviation in annual fees.
That said, harder rates remain for difficult to place construction areas such as structural and geotechnical engineers, Design and Construct (D&C), and certifiers, however, there are significantly more available markets than a few years ago.
We continue to urge caution when selecting an insurer as we feel that there is not enough premium in the larger market pool to ensure the longevity of all insurers in the market once claims start to materialise.
The construction industry remains under pressure and margins are tight. The national “need” for more homes continues to add pressure to a sector where builders are seeing smaller profit margins. History tells us that where margins are tight, insolvencies follow and build quality declines.
We see great risk in this sector and expect an increase in claims in what is already a very adversarial industry. The cost of litigation only increases with the passage of time and this means more borderline negligence claims, namely those which could easily go either way, will simply have to be settled to avoid significant legal defence costs and long drawn out claims.
We expect the return of the hard market sooner than most may expect – perhaps in the next 2 to 3 years.
Insurance appetite and capacity
There continues to be ample capacity for SME businesses, with insurers looking to build their books within this perceived lower risk area of the market. Insurance rates are dropping for SMEs and we are seeing significant competition.
Insurers’ construction professionals’ appetites are as follows:
We continue to see increased competition in all areas which is a welcome relief after so many years of the hard market.
Certain activities and disciplines are still of concern for insurers including:
- High rise residential.
- Façades design.
- Design and Construct (D&C).
- Certification.
- Complex infrastructure projects.
Whilst there is reduced but sufficient capacity for those in the above disciplines, it remains vitally important for construction professionals to stand out from the crowd come renewal time. See our July 2024 Market update and article on renewal strategy here.
D&C PI & principal controlled PI insurance
Design & Construct professional indemnity remains a difficult area, however, there is still strong insurer appetite.
Principals are continuing to push the PI risk down to the D&C contractors’ PI insurance.
Relying solely on contractor arranged insurance presents risks for principals. Often contractors negotiate cover which is not favourable to the principal, and there may be no or limited cover if the contractor has breached its policy conditions or signed an agreement that breaches contractually assumed liability exclusions in PI policies.
Additionally, there always remains the possibility of the policy being eroded by claims brought by third parties other than the principal.
We recommend principals take out principal controlled professional indemnity insurance as a key part of a robust insurance programme.
Policy coverage and claims handling – beware the softening market
As we have seen in previous softening markets, the focus on market share and competition can have poor insurance policy outcomes for your business. New and returning insurers do not necessarily have the same level of market knowledge and experience as those who remained in the market and do not necessarily have the most appropriate policy coverage.
Similarly, they may not have the same level of experience in handling construction professionals PI claims, having been out of the market for some time.
Please see our recent article for exclusion clauses to be wary of.
Key issues
Some of the key issues at present include:
- Insolvencies continue to be an issue in this sector. Client selection and debtor vigilance remain fundamental to your business.
- In NSW, the new Engineers Registration Scheme is up and running, however, the new Practice Standard has been delayed again. Unfortunately, the Draft Building Bill NSW 2024, which consolidates 9 pieces of building and construction legislation is also delayed and “under review” by Government.The following articles provide further information:
Changes to registration for engineers scheme and fitness for purpose update
The one Bill to rule them all – Building Bill NSW 2024 - In Victoria, the Victorian Building Authority (VBA) is being superseded by a new regulator – the Building & Plumbing Commission (BPC). The BPC will bring the state’s key building industry functions under one roof namely, regulation, dispute resolution and domestic building insurance which will give consumers better access to services.The new BPC is a step closer with the passing of the Building Legislation Amendment (Buyer Protections) Bill 2025. For more information on the BPC see article here.
- In Queensland, the Crisafulli Government is reducing red tape and unnecessary costs to make it easier for builders, tradies and subbies to get on with the job, delivering the homes Queensland needs sooner. Changes will include:
i. “Scrapping unnecessary financial reporting for more than 50,000 individual operators in the self-certifying licensee categories.
ii. Providing more time to meet new fire protection licensing rules to minimise disruption to important work.
iii. Scrapping occupational licence fees for plumbers doing fire protection work.
iv. Fast-tracking the digitising of licensing and administrative processes which are still paper-based.
v. Amending the legislation governing the Queensland Building and Construction Commission to remove duplicate workplace safety notification requirements.”For more information see Queensland Department of Housing and Public Works. - In WA the review of WA Building Regulations is complete and reforms are underway. This includes the Building Engineers Registration which provides that from 1 July 2024, building engineers in Western Australia must be registered. For more information on the reforms, please see here.
- In SA, the Building and Construction Industry Review and consultation is complete and under review. The Government will report on the consultation outcome in due course, in the meantime, more information is available here.
- In NZ the Government is undertaking a major reform of the building system with the intention of bringing greater flexibility to the current system. The Government is also reviewing liability apportionment across the building system noting recent case law developments.The new Building (Overseas Building Products, Standards, and Certification Schemes) Amendment Bill is “expected to put up to 250,000 more building products on shelves this year alone – giving Kiwis building and renovating their homes more choice to fit their budgets.” More information is available here.
- PFAS continue to emerge as new areas of risk in the construction and other industries. Safety in Design reports need to address these risks. For further information see our article here.
Continue reading our full range of market updates:
- Insurance Market Overview: July 2025
- Property
- Commercial General Liability
- Motor
- Contractors Plant & Equipment
- Renewable Energy
- Strata
- Claims
- Workplace Risk
- Executive & Professional Risk
- Construction
