Insurers are urging the construction industry to embrace reform in order to help improve the provision of professional indemnity insurance for the sector. The London-based International Underwriting Association (IUA) has called for continuing improvements to regulation and culture, prioritising quality construction and safety over cost-cutting.
An industry survey published by the Construction Leadership Council highlighted significant cost increases and the introduction of new restrictions on professional indemnity insurance, says the IUA in a statement. Such tightening coverage terms are the result of a considerable period of difficult underwriting conditions and deteriorating claims performance, driven partly by endemic problems within the industry, members of the IUA’s Construction Professional Lines Working Group believe. In the UK, many issues influencing risk management have already been identified by the Hackitt Inquiry established in the wake of the 2017 Grenfell Tower fire. Dame Judith Hackitt led the independent review of building regulations and fire safety, and issued a final report in 2018 that contains recommendations on the future regulatory system.
Chris Jones, IUA director of legal and market services, said, “It is clear that the construction industry and professional indemnity insurance market have both experienced extremely challenging business conditions. Insurers have handled a great many claims arising from fire safety issues and the use of cladding, but although high-rise residential buildings are the biggest worry there are also more widespread risk management concerns.
“We are encouraged by a proposed overhaul of the regulatory framework, but it is clear that many historical liabilities have yet to develop into claims and this remains a key factor for insurers in their underwriting assessment.
“A shift in culture is required in order to overcome continuing uncertainty about the enforcement of regulation and a lack of oversight and accountability in the construction process.
“In spite of many challenges insurers continue to offer a wide and competitive range of construction professional indemnity products. Construction is a complex industry and IUA members are keen to work collaboratively to ensure a better dialogue on risk management. We are pleased to be represented at the Construction Leadership Council.”
The IUA Construction Professional Lines Working Group was established in 2019 to encourage greater engagement between insurers, government, regulators and construction firms.
The IUA represents international and wholesale insurance and reinsurance companies operating in or through London. It exists to promote and enhance the business environment for its members.