Demolition and skip companies face huge premium rises or no cover

Lloyd's syndicates are shunning demolition contractor and skip hirer risks or imposing premium increases on them of up to 400%.

The move follows fears that insurers will run out of capacity for liability risks in the next three months and so underwriters are abandoning some of the high risk sectors.

Andrew Holman, chief executive of broker Holman, said: "This will force some underwriters to close their books to new cases and write renewal business only."

Since the World Trade Centre tragedy, rates have increased on most renewals by about 30% to 50% on average.

The broker has now forecast a capacity crunch as the rise in liability premiums increasingly absorb allocated stamp.

"Unless something is done quickly, current allocated capacity on some syndicates will be used up within the next three months," said Holman.

"Unfortunately, capacity has not increased at the same rate as premiums this year. The number of syndicates writing liability business has decreased and there is definitely a risk averse mentality with some underwriters."

He said, as underwriters have been losing money on this type of risk for years, "it is not surprising many are throwing out poor stock and concentrating on profitable sectors".

This meant some types of business, including demolition contractors and skip hirers, have "substantial minimum premiums imposed" or will not be quoted at all.

"For the smaller clients these minimums can amount to 400% increases or more," Holman said.

He also predicted that unless syndicates buy in excess stamp soon "it will rapidly become like it was at the back end of 2001, when syndicates gave precious capacity only to their trusted brokers".