Construction insurance sector set for growth with energy, utility projects

Energy and infrastructure projects are expected to climb 7.8% and 5.1%, accordingly.

The construction industry is poised for significant growth in 2024, driven by energy, utilities, and infrastructure projects, which are expected to rise by 7.8% and 5.1%, respectively. Alongside this, the region’s construction insurance market has maintained sufficient capacity to support the region’s extensive projects. 

However, shifts in market conditions are evident. Insurers are dealing with rising claims costs and inflationary pressures, yet competition among insurers is providing opportunities for favourable rates, particularly for clients with well-documented risk profiles, according to WTW’s Global Construction Rate Trend Report.

Additionally, insurers are tightening coverage terms for natural catastrophe risks in high-risk areas such as the Philippines and Taiwan, implementing stricter limits and higher deductibles to manage exposure.

Emerging opportunities are likely to arise from the soft market, with increasing interest in addressing coverage gaps for large and complex risks, including construction all-risk (CAR), erection all-risk (EAR), heavy civil infrastructure, project-specific professional liability, and inherent defect insurance (IDI) coverage, particularly in Europe, Asia, Australia, and New Zealand. The US is expected to see positive developments in auto liability and lead umbrella casualty lines.

Despite economic fluctuations and geopolitical tensions, Asia’s economy is expected to grow at 5.0% in 2024, according to the Asian Development Bank. 

Major economies like China and India are spearheading construction efforts. China's economic growth is expected to moderate to 4.8% in 2024, but Chinese firms remain active in infrastructure and renewable energy projects across Asia. 

India continues its dynamic growth, supported by the $1.4t National Infrastructure Pipeline, which focuses on roads, railways, and urban development. Other countries, like Bangladesh and Indonesia, are also heavily investing in infrastructure to support urbanization and economic growth.

Renewable energy investments remain prominent, particularly in China, which plans to invest $675b in clean energy by 2024. Southeast Asia is also expanding its renewable portfolio, with investment expected to exceed $76b by 2025. These projects are creating significant demand for tailored insurance solutions to address unique risks associated with these sectors.

Looking forward, the market is expected to remain stable in terms of rates, but competition may intensify as insurers aim to capture market share and meet premium targets. 

The construction insurance market will need to adapt to changing conditions, particularly in managing natural catastrophe risks and adjusting coverage for complex infrastructure and technology projects. As competition grows, clients with high-quality risk profiles could see better terms and more favourable rates heading into the latter half of 2024 and beyond.

Recruitment challenges continue to affect the industry, particularly in attracting specialized talent such as engineers in renewable energy. Insurers and brokers are focused on enhancing their capabilities to meet the growing demand for expertise in emerging sectors like clean energy and technology.