Americas, Asia Pacific, UK & Europe
Insurance 2023 - the year ahead
Rising costs for materials and goods will affect construction and engineering market, but insurance rates will continue to soften
Cost inflation, caused in large part by the effects of the conflict in Ukraine, will continue to have an impact on construction and engineering professionals in Australia as we head into 2023.
Inflation of prices for raw materials such as timber and steel, which began during the worst of the COVID-19 pandemic, has been exacerbated by the war. And the global macroeconomic climate - particularly rising interest rates - coupled with labour shortages, will also result in construction and engineering professionals feeling the squeeze.
Against this backdrop, rates for professional indemnity insurance coverage have been softening somewhat after a period of market retraction. That withdrawal of capacity, and resultant rate increases, followed a series of high profile losses, notably the Lacrosse apartment fire in Melbourne in 2014 and the 2016 Grenfell Tower tragedy in London in 2016. Both of those events involved flammable cladding on high-rise residential buildings, and the subsequent legal cases and regulatory intervention affected insurer appetite for several lines of professional indemnity coverage. But recently we have seen capacity re-enter the market with the effect of reducing average rates for many lines.
Periods of economic distress, however, typically see an increase in professional indemnity claims, and we may well see claims rise significantly as macroeconomic conditions bite.