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Insurers are seeking rate hikes of 5% to 15% for primary casualty construction business, Marsh Inc. said in a special report on the sector published Thursday.
But, “risks with high loss ratios typically are experiencing higher increases and nonrenewal notices,” says the New York-based broker's Construction Market Update for August.
“In the first quarter of 2012, marketing the account generally was successful in lowering rates compared to the incumbent's offering; however, that stopped being the case in the second quarter. With the competition less aggressive, more incumbents are keeping the business,” says the report.
The report also says insurers remain strict on policy wording “as they try to limit the coverage afforded to the contract requirements.”
“U.S. construction firms are experiencing a much more challenging liability market as underwriters seek to raise rates and restrict coverage to make up for years of soft market conditions,” Michael W. Anderson, Philadelphia-based leader of Marsh's U.S. construction practice, said in a statement. “This comes against the backdrop of medical cost inflation and changes to some state statutes that have extended coverage beyond the insurers' originally intended scope.
“However, the insurance industry's capital position remains very strong. So while underwriters attempt to apply rate increases across the breadth of their contractor portfolios, the market remains competitive, especially for well-managed risks,” Mr. Anderson said.
The report also says the market for project-specific general liability is competitive in most states. Also remaining generally competitive are general liability wraps and controlled insurance programs, as well as the markets for contractors professional liability and environmental insurance, according to the report.
Capacity for umbrella and excess and for builders risk remains stable, the report says.
Experts have reported that for the first half of this year, while most rate firming among casualty markets has been modest, many primary and excess buyers in higher-risk industries including construction, energy, transportation and life sciences have been presented with rate increases of 10% to 15% over 2011.
NEW YORK—Allied World Assurance Co. Holdings A.G. has launched a construction casualty division.