“Same, same, but different” - a common phrase used in certain cultures with alarming accuracy despite its contradictions. If one has spent any time in South East Asia, this phrase will resonate for it is used both on the street and in the boardroom. Its meaning can be hard to grasp for the uninitiated but it could be argued that insurance buyers and brokers in the current market would inherently understand it.
A great deal has happened in the past 12 months. While the rest of the world may have felt that the events in the Gulf of Mexico and US were a world away, the ever globally connected market place simultaneously held its breath during December 2017, and come January 2018 the global Construction market was still “same, same”.
There was no change to the unprecedented market capacity. The now well established hubs of Singapore, Miami and Dubai had not diminished one bit and London remained as the global connection point and thought leader and main capacity provider. Price did not change overnight and nor has it shown any sign of hardening since. Exposure to Natural Catastrophe risks remain an underwriting concern, but so have general risk dynamics as you would expect. Relationships remain, as do low commodity prices and investor reticence. Credit is still hard to secure. Same, same.
So on the face of it its business as usual, and on the most part it still is. However, the devil is in the detail and in this, the softest Construction market cycle to be seen for many years, the difference is very much in the cumulative detail of the transaction.
A soft market is an interesting time for any intermediary. As is often the case, a wealth of choice is sometimes detrimental to the transaction. If we factor in unprecedented capacity levels across accessible global trading hubs it is often confusing for the buyer as to who to choose to partner with.
Early engagement with your broker is a key differentiator. Effective buyers have always valued the input their specialist brokers can bring in all facets of contract negotiations. As the contracts relevant to the construction project are in essence its foundations it’s an essential but sometimes overlooked part of a successful project delivery.
In partnering with clients to build these foundations we collectively develop the required baseline for policy coverage. This is a critical moment. An introspective review of what the parties view as the norm is required, as whilst market dynamics may indicate premiums may fall no further, experienced intermediaries are pushing for even wider coverage and the removal of sub-limits where possible. Insurers are responding to these requests for clients where they believe there is the opportunity for an equitable relationship managed by a knowledgeable broker.
An increasingly common mistake is to go to market early and across multiple brokers. It’s a logical step for any purchaser in a theoretical market place. However, reality is more Keynesian, and such an approach, being unappreciative of market dynamics, can often be detrimental to the desired outcome.
The go to market strategy is therefore another key area that we encourage clients to focus on in a collaborative way with their intermediary. Whilst specific risk dynamics will allow a specialist broker to identify suitable markets across the globe, one must also be particularly conscious of the existing relationships and experience of the parties involved. As a continued soft market can often hide potential issues it’s also useful to take a moment to review these client/market relationships at this stage with your experienced intermediary.
As regards the marketing strategy; for the most part it’s easy to assume that the best solution lies within the local hub. Globalisation of available capacity is now well established and given where we are in the pricing curve, this has for the most part been an effective solution over the past few years.
However, capacity is increasingly agnostic to geography. The market’s reach is truly global and rates potentially at their uniform lowest. As such, major brokers should now access all applicable hubs in a considered way. Save for naïve market access before strategies are set, experienced specialist intermediaries are well experienced at matching risk and appetite across all applicable hubs, often in ways that surprise our clients.
Post placement, an increasingly worrying trait of the current market cycle is the propensity for a “bind and forget” view that may be attributed to all parties to the policy; post- placement activities are as important as pre-placement. Invitations for site visits, timely and detailed project information updates, regular two-way communication between parties, though leadership and updates from intermediaries. These are all “value addeds” to the relationship post placement and help bind relationships between clients and markets that will only ever benefit all parties in the event of a claim. These relationships will also transcend polices, building effective influence in the market place benefiting any future placements.
So to finish – it’s “Same, same” when it comes to Onshore Construction market conditions - but to get the best for your risk it’s the differentiators, the details, that an experienced intermediary can bring to your business that will truly get the best results alongside the most competitive price.
Philip Callow is an Executive Director at Willis Towers Watson’s Construction division in London.
