It’s a well-known fact that construction firms, building inspectors, designers and architects are all required to take out professional indemnity (PI) and professional liability (PL) insurance before they carry out any work. However, according to the Confederation of Construction Specialists, many firms are struggling with massive hikes in PI insurance premiums that are leaving some fighting for survival – and putting others out of business altogether.
To make matters worse, insurers are leaving design and construct PI market in droves due to an increase in claims and the resulting hit to their profits, further hardening the market.
Insurers put off by increasing risk
A number of factors have combined to create the situation many firms now find themselves facing. Firstly, it is believed that the huge cost of the Grenfell disaster for insurers, the fallout of which subsequently led to a number of other high-value cladding claims, was the initial trigger that caused insurers to increase their premiums, as well as introduce further restrictions or exclusions on coverage (particularly for fire safety and cladding-related issues).
Furthermore, the revelation that hundreds of buildings across the country were unsafe to live in shone a rather negative spotlight on the work of building inspectors, whose job it is to confirm that new buildings are compliant with all relevant regulations – meaning their PI premiums also shot up.
The industry has also seen an upswing in claims – and not just cladding-related. The surge has also been attributed to the rising complexity of construction work and the implementation of new technologies, meaning insurers covering this type of work are raising premiums to counteract the perceived heightened level of risk.
The aftershock of Carillion still reverberating
Carillion’s shock collapse and its resulting impact on supply chains and general perceptions of the resilience of the construction sector have also had repercussions for the PI market. If anything, the fall of such a huge industry name proved that no firm is immune to insolvency, again heightening insurers’ perceived level of risk and making them even more reluctant to provide cover.
Risk passing down supply chains
Due to the hardening of the market, a lot of main contractors unable to meet insurers’ PI requirements are now pushing the liability down their supply chain, obliging design and construct subcontractors to have ever higher levels of PI cover before awarding them work. In a recent article, the Construction Enquirer reported that big name contractors are demanding unmanageable levels of cover from their subcontractors (with £5 – £10m becoming “the norm”), thus putting their businesses at risk.
Markets are still out there – and we’re here to help
It’s not all doom and gloom, however. Despite a challenging market, there are still providers out there willing to offer cover. Working with our excellent Insurer Partners, Focus still has access to PI markets through our specialist Design & Construct PI facility, and we’re always happy to talk about difficult-to-place risks. Just get in touch on 0345 345 0777 or email us at sales@focus-insurance.com.