The Irish construction sector, still feeling impacts from 2017’s spiralling insurance premiums for employer and public liability protection, described then as an “unsustainable burden” by the Construction Industry Federation, is once again suffering PI and liability insurance woes.

Whilst, the Irish construction market has enjoyed a period of sustained growth, according to the 2019 SCSI/PWC Construction Market Monitor, an insurance capacity crisis is threatening the bottom-line profitability and even the existence of some construction businesses.

At a time when Irish construction businesses and engineers should be examining a post-Brexit opportunity - a potential withdrawal of UK-based competitors - a hardening insurance market is making life extremely difficult.

Irish Construction Sector Insurance: the issue

So why are things becoming so problematic for Irish contractors and consultants when it comes to construction insurance and, in particular Professional Indemnity (PI) Insurance, Public Liability Insurance and Employers’ Liability cover?

Irish construction firms have relied heavily on Lloyds of London brokers to underwrite their PI cover, with Lloyds policies having provided a financial safety net for contractors, engineers, architects, façade consultants, building inspectors and fire engineers, to name but a few.

After a £2b loss in 2017 and a £1b loss in 2018, Lloyds’ management has instructed its syndicates to put their house in order, ensuring they return to profitability within three years, or face closure. The syndicates’ response has been to withdraw from underwriting PI and some liability protections completely, or increase premiums significantly, or restrict the terms on which they will offer insurance, excluding certain key areas such as fire risk.

We now have a ‘hardening’ insurance market and this is affecting Irish construction firms, as well as the UK construction sector.

What has caused the losses?

The hardening market can be attributed to a few crises over the past few years, including:

• the Grenfell Tower tragedy and anticipated claims arising from it
• the collapse of UK construction giant, Carillion, and the impact on the supply chain
• contracts that have been signed too hastily and which have not limited the liabilities of the contractor or construction-sector consultant
• catastrophes affecting the global construction sector
• specific Irish situations.

With regard to the latter, the volume of claims arising from injuries and the resulting awards having to be covered by public liability and employers’ liability insurance in Ireland, have been unsustainable.

This has led to massive hikes in premium and the withdrawal of some insurers from the Irish market. It has also prompted a review by the Competition and Consumer Protection Commission (CCPC), with concerns about the impact it is having on Irish businesses.

Some Irish construction firms have agreed to unlimited liability within contracts - often a requirement of private sector entities and public bodies – but not what insurers wish to see.

What does this mean for Irish construction?

• Many Irish construction sector companies are SMEs and micro-businesses, which cannot absorb massive insurance premium hikes. There were already concerns about Brexit tariffs leading to considerable increases in the price paid for imported raw materials. With some PI insurance premiums increasing 150%, these are worrying times.
• Many firms are not being offered cover at renewal, because their insurer has withdrawn from the market and their broker has no other options to offer.
• Contractors requiring a decreed amount of liability cover, to fulfil contractual obligations, are finding it impossible to secure, i.e. they have a €2m limit, but require €5m that they simply cannot put in place, due to their insurer’s stance.

What can an Irish construction-sector business do, to find insurance?

Whether you are a consultant requiring PI insurance, or a contractor needing robust liability cover, there are certain advisable actions, within this hard market:

• Find out quickly how your insurance policy will be affected at renewal. Work 8 weeks ahead of renewal, so you have time to look for alternative protection. If not, you could be without cover when your policy expires.
• Do not rush to sign contracts, accepting terms that will have major impacts on your insurance protection and could even lead to an insurer refusing your claim.
• Work with an insurance broker who is best-placed to make your case to an insurer. You will need to work with such a broker, to put together a good presentation of your risk and this will take a few weeks to pull together, so start a conversation now.
• Be more diligent than ever when it comes to risk management. Do everything possible to cut claims and manage your risks more effectively. Document all of your actions.
• Tighten up your supply chain arrangements and ensure you are not exposed, should something negative happen to a client or supplier.
• Get an expert on board to help find you cover, at the right place, with the right levels of protection in key areas.

The good news is that Construction Risks UK – a specialist Chartered Insurance Broker to the construction sector - has been insuring construction risks for years and has excellent insurer relationships. We can gain the most favourable PI insurance terms and help clients – in Ireland as well as the UK – answer the increasing demand of insurers for more information, questionnaire completion and face-to-face presentations of construction risks.

We can work with Irish construction sector businesses struggling to find insurance protection and help steer them through the maze. The positive way to look at things is that this situation will be part of a cycle which may right itself in a few years’ time. In the meantime, help is at hand if you call 03300 53 9494 if calling from UK or +44 (0) 3300 53 9494 if calling from Ireland.