Construction is defying the odds. Despite supply chain issues and labor shortages, this industry has continued its growth streak, and there's no sign of it slowing down anytime soon.
According to the Construction in the United States of America (USA) - Key Trends and Opportunities to 2025 report,1 the U.S. construction industry is forecast to grow by 3.7% in 2022, with residential construction, in particular, expected to post double-digit growth rates.
And with the passing of the $1.2 trillion infrastructure plan in August 2021, the construction industry at large is poised to continue its impressive boom. Savvy insurers are making plans to capitalize on the opportunities that abound.
An appetite for growth
Nationwide E&S developed its construction strategy based on input from its wholesale broker partners, national trends and insights from data that helps to evaluate current and future risks in the marketplace.
“Our current risk appetite is for commercial-related structures that are owned by a single entity,” explains John Posa, Vice President of Nationwide E&S's Brokerage Construction vertical for both Primary and Excess Casualty lines.
This includes a broad range of projects, such as new-build or renovated apartment buildings, hospitals, shopping malls, nursing homes, healthcare facilities, office buildings, industrial warehouses, and other structures that typically have one owner, regardless of how many tenants—and how many types of tenants—they have.
“We're really focused on commercial structures involving both general contractors and specialty trade contractors,” he adds.
Preparing for potential challenges
In an evolving market—even one that is growing—it's important to be ready to tackle any potential issues that may surface. Posa and his team have identified three areas of ongoing challenges facing the construction market today.
First, inflation and supply chain issues are impacting the industry—like everything else—but can cause more than just minor inconveniences. Tight supply results in higher prices, but shortages also are interfering with the ability of contractors to obtain the materials they need to make good on their obligations to their clients.
“General contractors, owners and specialty trade contractors aren't just facing delays on the completion of their current projects,” Posa notes. “These issues are slowing down their ability to bid on new jobs to drive future growth, too.”
And of course, COVID-19-related labor shortages are another wild card that contractors must navigate—one that compounds the woes of inflationary and supply chain pressures.
“When the labor force is depleted, every project can potentially be affected—no matter how big or how small,” Posa says. “Having an available, skilled labor force promotes solid building practices, elevates risk management techniques, and promotes expansion and increased profit margins.”
The last challenge Posa is carefully monitoring is the increase in capital coming into the E&S lines industry, which is resulting in greater competition among insurers. On top of that, new E&S carriers in the primary and excess casualty space aren't burdened by prior-year losses or operating expense margins, which makes them more nimble and able to assume greater risk with potentially lower pricing.
“Additionally, new up-and-coming carriers are picking at the talent of preexisting companies,” Posa explains. “They're going gangbusters trying to grow top line. They want to increase their piece of the pie.” He added, “Historically, we have seen carriers too focused on top-line growth with the lack of underwriting discipline, and that is why many senior leaders move from one carrier to another trying to escape their poor results.”
A cut above
To remain competitive in an ever-more-crowded marketplace, Nationwide E&S is dedicated to adding value for our partners at every turn.
“We must outcompete our competitors with things other than price,” insists Posa. “Offering wholesale partners a high level of responsiveness and technical underwriting expertise, with honesty and integrity, will assist all parties today and into the future.”
A 40-year track record and impressive AM Best rating speak to Nationwide's strength and stability, but there are many other ways Nationwide is adding value for both partners and insureds. First and foremost is Nationwide E&S's commitment to its deep and mutually beneficial relationships with our partners.
Nationwide has also cultivated a knowledgeable and experienced claims team to ensure we're delivering on our promise with every policy. They have years of experience related to the construction industry and its unique challenges, including both bodily injury and construction defect claims.
“This is at the heart of our business, and our claims professionals are always here to provide clarity for our insureds, defend them, when necessary, and do the best job possible to protect them,” says Posa.
Nationwide E&S's primary and excess casualty team is currently in the process of establishing enhanced risk management services to provide insureds with expert loss-control strategies, advice for making their businesses safer and tools to protect their financial integrity.
This business is also making a significant investment in a new underwriting tool, using enhancements in technology to make it easier than ever to quote and bind more accounts, so the underwriting team can spend less time on keyboard clicks and more time presenting the quotes that drive business.
“Our goal, and the mission we want to reinforce with our strategic partners, is to prove we are a world-class carrier with competitive pricing, solid terms and honest business practices. We're providing value to help them grow financially,” Posa says. “Why? Because we're in our relationships for the long haul.”
We specialize in small to large complex risks. When it comes to doing business, we offer a dedicated wholesale distribution network through appointed agents and brokers. Reliable name recognition plus a long history of strength and stability mean you can have confidence when you recommend Nationwide®.
With $900M written across our construction product offerings at Nationwide, we're proud to be a powerhouse in the space.We specialize in small to large complex risks. When it comes to doing business, we offer a dedicated wholesale distribution network through appointed agents and brokers. Reliable name recognition plus a long history of strength and stability mean you can have confidence when you recommend Nationwide®.
For larger, more complex risks visit nationwide.com/brokers to learn more about our Construction vertical, including our expertise, capabilities, appetite and more!