A/E firms that have low claim frequency and severity, that are not engaged in more difficult projects like condo work or bridge design, that have strong balance sheets (AR's do better than average in the industry), and that have proficient internal controls which can be clearly presented as well as low employee turnover still stir up plenty of competition amongst insurance carriers.
However, it has become evident due to some more generalized market conditions that rates will have to be increased within the next twelve months.
Significant losses in their investment portfolios that must be "marked to market" under Financial Accounting Standard Board (FASB) rules. Under-performing investment portfolios and the inability to achieve 15% return on investment by the industry (the standard performance benchmark) will force carriers to push rates higher.
Reinsurance covers are usually negotiated on July 1st or January 1st of the year, and it is more than probable that reinsurance costs will rise. Increased reinsurance costs or even the assumption of more net risk by primary carriers will inhibit and retract interests in less certain ventures. Generally, when increased risk cannot be passed to someone else or the cost increases, the end purchaser will have to cover the difference.
Continued deterioration in results in the A/E space due to an increase in claims frequency as a result of the economic downturn in the construction space. Whereas some owners/developers/contractors may have been willing to "work" with the design team when problems arose in the past, the squeeze in the availability of financing; shrinking tax rolls for government funded projects and aggressive sureties looking to recoup losses on projects means that what were once "little squabbles" are now turning into full blown litigation.
It is my guess that any built environment counsel will see similar trends and hints leading to these conclusions.
However, it has become evident due to some more generalized market conditions that rates will have to be increased within the next twelve months.
Significant losses in their investment portfolios that must be "marked to market" under Financial Accounting Standard Board (FASB) rules. Under-performing investment portfolios and the inability to achieve 15% return on investment by the industry (the standard performance benchmark) will force carriers to push rates higher.
Reinsurance covers are usually negotiated on July 1st or January 1st of the year, and it is more than probable that reinsurance costs will rise. Increased reinsurance costs or even the assumption of more net risk by primary carriers will inhibit and retract interests in less certain ventures. Generally, when increased risk cannot be passed to someone else or the cost increases, the end purchaser will have to cover the difference.
Continued deterioration in results in the A/E space due to an increase in claims frequency as a result of the economic downturn in the construction space. Whereas some owners/developers/contractors may have been willing to "work" with the design team when problems arose in the past, the squeeze in the availability of financing; shrinking tax rolls for government funded projects and aggressive sureties looking to recoup losses on projects means that what were once "little squabbles" are now turning into full blown litigation.
It is my guess that any built environment counsel will see similar trends and hints leading to these conclusions.
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