Builder's Risk / CAR

Builder’s risk

In general, the builder’s risk market has become more challenging, with no new entrants and a lack of capacity in some regions. This is especially true for regions that are exposed to natural catastrophe (Nat Cat) perils, such as the Pacific. 

Rates increased in the US and the Pacific and were relatively stable in Asia and Europe. 

In Canada, the increased cost of claims contributed to a challenging market. While there were no new entrants, several existing markets offered lead positions as their portfolios became profitable.  

For renewable energy in Europe, there has been an increasing demand from many insurers to write more of these projects. 

The volume and magnitude of construction projects announced in the Middle East has led insurers to compete more aggressively, typically resulting in improved terms and conditions for buyers. 

LEG 3 design cover

Rates for LEG 3 cover were generally stable, apart from the US, Canada, and Europe where rates increased in the 5% to 20% range.  

Insurers in Asia, the Middle East, Latin America and Africa have been generally reluctant to offer LEG 3, although in Asia there was increased participation in projects involving European contractors.

Similarly, US insurers now seldom offer LEG 3, generally doing so only on a case-by-case basis with comparatively higher rates.

It is available on building projects in the Pacific, although restricted to LEG 2 on erection all risks (EAR). 

In Canada, LEG 3/06 is available, although some markets pushed for LEG 3/96 exclusions.  

In the Middle East, LEG 2 is most commonly offered for design defects cover, although there has been an uptick in markets willing to offer broader LEG 3 cover for certain occupancies. 

Restrictions continue for wet risks, pipelines, scale ups, prototypical and other highly exposed projects. Insurers providing coverage for power and renewable energy risks are increasingly using LEG 2.

Delay in start-up (DSU)  

Demand for DSU continued to rise. Generally, this requires additional underwriting analysis on exposures. Rates broadly increased globally (5% to 10%), although stabilized in the Middle East. 

In Asia, the number of DSU claims increased. A significant number of potentially large DSU losses were notified towards the end of 2023 that are likely to drive pricing higher.  

In the Pacific and the Middle East, time-based deductibles are no less than 60 days in most cases. Insurers in Canada have generally sought to increase time-based deductibles.