Newsletter / Risk Management
Lockton Construction Market Update

October 2020

The outlook for 2020 was initially forecast as a slowdown of growth for many segments within the construction industry. As the impacts of the COVID-19 pandemic began to take effect, the original adverse forecasts quickly became a reality.

In a published FMI (Quarter 2 — 2020) outlook report, total engineering and construction spending for the U.S. is forecast to end down 9% in 2020, compared to 0% growth in 2019.

Construction insurance market

Similar to the broader insurance market, it is expected that the hardening of rates will continue through the remainder of 2020 and into 2021 for the construction segment.

The volatility in the construction insurance market gained speed in late 2019 as multiple lines of coverage experienced changes in rate with increasing momentum. In 2020, as COVID-19 and civil unrest spread across the U.S., the velocity of market hardening amplified and broadened widely into nearly all lines of coverage. Carriers frequently reevaluate underwriting appetites as a result of adverse litigation and legislative trends.

The reduction of capacity will also continue to be closely watched. Given the delay of many projects, essential policy period extensions should be sought early in the process.

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