Design & Construct Professional Indemnity Insurance packages have been subject to significant hikes in premium costs in recent months. Is your business budgeting according?
Design and Construct PI Insurance is suitable for contractors working in the main trades within the building and civil engineering sector, as well as for a wide range of construction professionals such as structural engineers, surveyors and architects. This insurance aims to protect businesses against claims for errors & omissions in design / specification, which can be very expensive to rectify.
Many contract awarding bodies will require Design and Construct Professional Indemnity Insurance to be in place before a contractor is considered for delivery of a project. The minimum limits being requested in contract pre-qualification have been on the increase in the past decade. Firms have also been required to agree to maintain these levels into the future as part of their contractual terms, often for 10-12 years post contract completion.
The Professional Indemnity market for Design and Construct risks had been relatively soft for many years with abundant underwriting capacity in Lloyds and the composite market. This produced a wide range of providers offering competitive rates, any one claim cover, high limits if required and very wide policy wordings as insurers sought to compete for business.
However, the Design and Construct Professional Indemnity Insurance market has been hardening sharply since the tragic events at Grenfell in June 2017. In the months following the incident which resulted in many fatalities, concerns about the choice of cladding products used in new and historic design and build projects and their impact on fire safety came to the fore. It is important that design and construction professionals make careful decisions about the products they recommend in their design specifications and ensure that adequate Professional Indemnity Insurance cover is in place to protect the business in the event of a claim down the line.
More recently insurers have also been reviewing the overall profitability of their books and their potential exposures as the cover operates on a ‘claims made' basis. Professional Indemnity insurance protection relates to claims which first come to light during the period of the policy, whilst the actual professional error may have been committed years prior. Many insurers have been making losses in this sector for some time and the need to return to underwriting profit is driving corrective action. This presents challenges for design and construction companies when it comes to renewing their Design and Construct PI Insurance for another year. Some Insurers who had been readily writing this business have even exited the sector altogether and this has led to a sharp rise in premium costs.
As well as rating increases, insurers are also imposing cover restrictions and endorsements, especially around the issue of cladding. Insurers are routinely asking additional questions regarding cladding work done and are imposing terms or often complete cover exclusions. Design and Construction companies thus face higher costs and reduced coverage as insurers reduce the limits they are prepared to give and increase policy deductibles / excesses in a bid to protect themselves against claims coming in.
It is very important for firms in this sector to plan ahead and be prepared for their PI renewal. Don’t leave this to the last minute. Speak to your broker at least 2-3 months in advance and determine the position regarding your current insurers.
Check that your broker is pro-active in the design and construct insurance market and has access to the widest range of options for you. There remain a number of specialist PI underwriters still cherry-picking this business and ABL Group has access to many of these key markets.
If you are a design and construct professional or contractor and are concerned about your Professional Indemnity insurance renewal, contact Executive Director, Ian McClure to discuss your options.
Ian has worked in corporate insurance broking for over 25 years and has considerable experience in design and construction sector insurance.
Tel: 028 9099 3670