Construction
Market situation and review
In the residential construction sector, the cumulative decline since 2021 – with a forecast value for 2024 – amounts to almost 35 percent, while commercial construction will decline by around eight percent by the end of 2024 and public construction by around 14 percent.
As a result of this development, there were numerous insolvencies in the construction industry, both among construction companies and project developers. One prominent example is the Elbtower in Hamburg, whose construction was taken over by the SIGNA Group, but which filed for bankruptcy last fall. The sharp decline in building permits in 2023 also illustrates the major slump in residential construction (in percent):
There are many reasons for this, but they can be attributed primarily to monetary factors: firstly, the rapid increase in interest rates for building loans, which tripled from January 2022 to September 2023 – from an average of 1.3 to 4.1 percent. Secondly, construction prices have risen significantly due to factors including higher wages and the cost of materials and energy. According to estimates by the German Economic Institute (IW), additional annual investments of around 20 billion euros are needed to meet the steadily growing demand for housing of around 355,000 apartments per year.
The situation is different, however, in the area of infrastructure construction, such as power lines or gas pipelines, as well as in projects to support the energy transition (hydrogen production, battery power plants, etc.). Here, the construction industry is seeing a general increase.
The situation in the insurance market has basically stabilized. Although one risk carrier has withdrawn from the area of combined construction insurance, the loss of underwriting capacity has been offset by a new market player operating in Germany.
Market development 2024/2025
In the past twelve months, we have not seen any signs that point to a hardening of the market. It is not to be assumed that there will be an increasing premium requirement on the part of insurers or that the prevailing terms and conditions will have to accept significant restrictions.
Conclusion
In the future, too, there will be a guarantee of being able to purchase comprehensive insurance coverage at attractive conditions for construction projects. This applies across the board to all areas: from building construction and civil engineering to engineering and power plant construction.
However, construction projects for which the risk carriers have so far been unable to access any in-depth statistical material remain challenging. These include, for example, timber hybrid construction projects, 3D printing or project realizations in an IPA contract. These construction projects require a high level of technical know-how on the part of the insurance broker in order to be able to conduct a dialogue with insurers at eye level and subsequently ensure comprehensive and appropriate protection for clients.
Your deas solution
In the current troubled times, the construction combination insurance provides more planning security, as claims are settled quickly and without unnecessary delays, so that no significant construction time extensions have to be accepted. As comprehensive construction insurance, it covers the possible risks of all parties involved in the construction (client, planner, contractor) in a single contract. This also greatly reduces the risk of legal costs resulting from disputes. This is how we put our customers' construction projects on a firm footing.
Cedric Lichte