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:
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Type of Insurance
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Rate Increase Outlook
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Property
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+5% to 10%
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Contractors Equipment
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Flat to +10%
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General Liability
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+5% to 15%
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Builders Risk
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Flat to +5%
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Builders Risk – Frame
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+10% to 20%
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Umbrella/Excess
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+10% to 20%
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Executive Risk – EPL, Crime, Fiduciary, Cyber
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+10% to 25%
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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.
For additional questions, please contact Construction Law Attorney Krista D. Warren at kdwarren@bmdllc.com.