Construction Industry Trends And Predictions Through 2021 And Beyond: Insurance And Emerging Threats – Real Estate and Construction

Cavina T Morris


United States:

Construction Industry Trends And Predictions Through 2021 And Beyond: Insurance And Emerging Threats


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A 2021 survey identified three key issues
impacting the construction industry in 2021: (1) the financial
health of contractors; (2) the continuing risk of the pandemic; and
(3) technology driving productivity, but also increasing the risk
of cybersecurity threats. With this backdrop, insurance premiums in
the construction industry are generally on the rise in 2021.

Overmyer Hall Associates, as a Columbus-based commercial
insurance broker, provided the following rate outlook for 2021:


















Type of Insurance

Rate Increase Outlook

Property

+5% to 10%

Contractors Equipment

Flat to +10%

General Liability

+5% to 15%

Builders Risk

Flat to +5%

Builders Risk – Frame

+10% to 20%

Umbrella/Excess

+10% to 20%

Executive Risk – EPL, Crime, Fiduciary, Cyber

+10% to 25%

Overmyer explained that builders risk insurance rates related to
large frame projects (e.g. large hotels, multifamily complexes)
have been on the rise because, generally, the number of carriers in
the marketplace is shrinking. Moreover, there are an increased
number of terms and conditions placed on larger frame projects by
underwriters, such as specific and intensive security guidelines.
Overmyer does not project the builders risk insurance in large
frame projects will change anytime in the near future.

Another area of coverage with rates on the rise is
cybersecurity. With the adoption and integration of technology in
the construction industry, there has been an uptick in
cyberattacks. For example, in early 2020, Bird Construction, a
major Canadian Military Contractor, was a victim of a Maze
ransomware attack in which hackers demanded approximately $9MM in
exchange for a decryption key. Cyberattacks can result in, among
other things: downtime on a project, breach of intellectual
property, breach of bid data, and potential property damage. As
these attacks become more widespread and sophisticated,
cybersecurity insurance rates continue to rise at a higher
rate.

To prevent cybersecurity threats and/or potential attacks,
contractors are encouraged to have a risk assessment conducted by
an IT professional, which can sometimes be coordinated through the
contractor’s CPA. Other internal measures that contractors can
take to defend against cybersecurity threats include: (1) providing
training and information about cybersecurity to employees; (2)
implementing multifactor authentication (MFA) to mitigate exposure
when employees do make mistakes; (3) protecting
sensitive data against back-end access in web applications; and (4)
having a comprehensive, multifaceted strategy for addressing
security needs. Even with the rise in rates, those in the
construction industry should obtain and maintain cybersecurity
insurance in the event of a potentially crippling
cyberattack. 

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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