Cornerstone - Construction feeling effects of difficult insurance market

22 December 2020

Many readers will have either directly or indirectly experienced a shift in the insurance markets recently. We are seeing difficulties for all those involved in the construction sector, but particularly in the professional indemnity (PI) insurance market.

PI insurers have suffered in recent years due to a number of factors including increased competition and an increase in number and severity of claims. Cladding claims following the Grenfell disaster exacerbated what was already a very tough market, and it is concerning that we don’t yet know what impact the events of 2020 will have. So whilst the market is difficult at the moment we may see it worsening over the short term.

These difficulties are having several effects.

  1. Increased premiums: It is not uncommon for those involved in the construction sector to be faced with insurance premium increases above 100%. For many businesses these premiums are not sustainable.
  2. A lack of availability of higher limits of indemnity: Each and every claim insurance has been the typical basis of cover for many in the construction sector, but such insurance has become difficult to obtain with aggregate cover becoming more prevalent.
  3. Increased coverage restrictions: Exclusions and limitations around cladding and fire safety are commonplace at present.

Now more than ever those engaging consultants, contractors or the supply chain need to be extremely careful that they do not agree changes to contracts which compromise the protection they have if something goes wrong and which could impact their ability to deal with a completed project in the future. Whilst it is not beneficial for any party to agree a contract which isn’t covered by insurance, those with an interest in completed projects may not be comfortable with all changes requested by insurers.

Although ‘we would say this, wouldn’t we’, taking advice from professionals, including on levels of cover being offered by those involved in the construction process, is crucial to reduce the risk of suffering uninsured losses later.

This article is from the December 2020 issue of Cornerstone, our newsletter for those working within the construction industry. For further information please contact a member of Birketts' Construction Team. To download the latest issue, please visit the newsletter section of our website.

The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at December 2020.


Rory Abel

Senior Associate

+44 (0)1603 756548

+44 (0)7825 441409


* denotes required fields.