In this broker special, we hear the views from intermediaries at the coalface of the UK’s construction market
The local broker:
Athol Burke, managing director, Bruce Burke & Co
“There are not a lot of construction start-ups around, so we’re surviving on renewals, basically. The recession has been a big part of that.
“Premiums are more competitive because all the insurers are after a bigger share of a smaller market, and they’re cutting each others’ throats. It’s unsustainable and must have nearly bottomed out now. The result is that brokers may have to start reducing their commissions to stay competitive, if that’s possible, and making money on the fee.
“The biggest issue regarding liability is the no-win, no-fee solicitors. Over the past three or four years there have been more and more claims. People see an advert, remember that four years ago they bent their finger when they were on a building site and try to get something out of it. It’s all part of the compensation culture.
“The government need to change the laws on solicitors’ advertising and legislate against this. Even we get phone calls saying that they can get us back money for an accident we’ve had. And we say, “hang on, we’re an insurance broker”, and they say, “oh sorry”, and hang up. It’s nauseating. We get two or three calls a day. It’s very frustrating.”
We say …
The government’s crackdown on claims management companies is a welcome move in tackling compensation culture.
The Leeds broker:
Simon Mabb, managing director, Romero
“One of the difficulties in this market can be capacity on the larger risks, so we have to make sure that the insurers have the necessary underwriting ability. At the higher end you tend to be into a slightly more limited market.
“The relationships we maintain with insurers are very important indeed. That’s why we like to do some local business - you can actually go and talk to the underwriter and explain the risk or even get the underwriter to meet the client.
“Following the recession, the construction sector suffered significantly in the north of England. In Leeds they were going to build the tallest building in Europe, but it was shelved after the builder went bust, and the Westfield shopping centre in Bradford is just a big hole in the ground and nothing’s happening.
“The recession also affected theft. The high cost of metal at the moment means people are stealing from sites more. A pilot scheme is being run in the North East with about 250 scrap dealers who now have to take photo IDs from individuals selling metal. It’s reduced the problem by half. So initiatives like this are a help.”
We say …
Broker-insurer relationships are key, especially when it comes to the larger risks.
The global broker:
Mike Hawkes, managing director, construction services, Gallagher Heath
“Historically we’ve dealt with heavy civil engineering projects and one-off developments. Currently we have the four biggest projects in the UK: Crossrail, the Forth River crossing, the Lee tunnel and the Thames Tideway, which will be the largest utility tunnel to be built in the northern hemisphere.
“If it’s public sector procurement, all insurance placed has to be done through EU procurement rules. We manage that process, then insurers register their interest in placing cover for the risk and tender accordingly.
“Capacity for large risks can be an issue, but a lot of it depends on who the lead insurer is. If you get a strong and knowledgeable lead insurer,
you will then find the rest of the market is more than happy to follow that. It is essential that we maintain a good relationship with insurers for
“Not all the business goes through Lloyd’s; there are some big non-Lloyd’s companies. If we’re looking at a housing development or a low-risk development, then markets in Europe, the Middle East, Singapore and the rest of Asia are competitive, but when it comes to the heavy construction risks, London still dominates.”
We say …
The industry is a good place to be for larger brokers, with opportunities around the world and competitive prices, despite an apparent lack of capacity.
The Lloyd’s broker
Mark Dutton, director, W Denis
“We’ve always provided the annually renewable insurance for specialist contractors. It ranges from those at high risk - working at height or with asbestos, for example - through to arranging specialist, single-project insurance for developers building large projects.
“In the UK, most of the activity at the moment is in the South East and London. As a Lloyd’s broker, we don’t have any problem placing large projects, and although we’re headquartered in Leeds, we have an office in London and I spend a day or two every week down there meeting clients and underwriters.
“We have certainly seen evidence of things reducing in terms of the amount of business written for construction in the UK, with some of our clients and underwriters focusing on other areas where there is still demand for construction. Some of our clients are looking at Latin America and other emerging markets where there’s a growing middle class and demand for better housing.
“The UK has dropped down from where it was, but there is still a lot going on nationally. The infrastructure announcements will generate business in the UK, and that’s very good news.”
We say …
Foreign markets can be attractive for mid-sized civil construction projects, but London remains most adept at covering more complex jobs.
The regional broker
Donal Henry, corporate business manager, Higos
“The type of business we get varies widely, from per-capita liability, right up to some national construction and private housebuilding firms.
“When the recession hit, there was a lot of panic, as the construction industry was over-extended. There were projects going up left, right and centre on a bit of a wing and a prayer, so the effect was immediate downsizing.
“A couple of large companies went out of business, including some of the large servicing companies in the South West, but it went right down the chain as things ground to a halt.
“We now write an increased amount of local business. We have a corporate team that deals with the big stuff, but we have a ring of branches around the South West.
“It was a fairly high-risk strategy during the recession, because our overheads were higher than that of our competitors, who may only have one office. So we were concerned we were going to have a rough ride, but we actually found the reverse - that when times were difficult, a local and friendly service seemed to be what people were after.”
We say …
Being accessible to local customers engenders trust and confidence that is rewarded with loyalty.