Welcome to issue 2 of Aon Construction’s Know the Drill for 2023. In this issue we focus on three topics:

• Aon’s 2023 Weather, Climate and Catastrophe Insight

• New Zealand’s recent weather events and the insurance market response

• The importance of reviewing sum insured values

Aon’s 2023 Weather, Climate and Catastrophe Insight

As climate change impacts the frequency and severity of costly weather events across the globe, the impact is tangible, immediate, and measurable. With this challenge comes opportunity.

Aon’s 2023 Weather, Climate, and Catastrophe Insight better informs readers on how to identify natural disaster trends and make better decisions to manage volatility and enhance global resilience.

This year, we investigate how to de-risk climate innovation and unlock opportunities to build a resilient future for the communities in which we live and work.

Read Aon’s Insights here >
 

New Zealand’s recent weather events and the insurance market response

There is no denying we have been delt a tough hand for the start of 2023. Throughout the last couple of months, a number of severe weather events, including Cyclone Gabrielle, have impacted all parts New Zealand.

As a result, it is our prediction that New Zealand’s insurance markets will look to introduce separate and higher flood claim deductibles, and on large projects, they could look to follow the international market trend of ‘flood’ forming part of the Natural Perils definition. Because of that change, a value at risk time of loss (VARTOL) deductible would apply to flood claims as it currently does for earthquake claims.

Going forward, the construction insurance market will remain challenging as the construction sector continues to be under increased scrutiny from insurers. Insurers are trying to provide a sustainable offering in the face of increased claim settlements and costs when placing Contract Works. Following a large weather event, insurance placement always requires a clear update on how the site will responded to such an event, to provide insurers comfort in offering coverage. This is in addition to site-specific flood risk analysis and details.
Parallel to these weather events are the impacts of inflation. The extent of insurance pricing increases varies, widely by the line of business. However, in general, we are seeing an inflationary premium increase, to begin with, and then increased values and turnover to be factored in over and above.

Pressure will remain on loss adjuster resources given the extent of weather event claims, however good progress is being seen across our client’s project sites that were impacted.

Following a severe weather event, our advice is to lodge your claim as early as possible, with clear details and documentation of the loss for the best chance at early settlement in light of the volume of claims that arise from these types of events.
 

The importance of reviewing sum insured values

Now is the time to review your sum insured values. In New Zealand, we have seen annual inflation increase by 7.3%, which is a 32-year high.
Read Aon’s Insights here, which explains the direct impact inflation has on your insurance and the importance of reviewing your sum insured values.
More specific considerations for the construction sector are:

Contract Works
Are the inflationary costs post a loss sufficient? This is for both the built and unbuilt portions of the project, given a number of projects are in excess of 12-month builds and we are still seeing projects requiring extensions of time to the contract works insurance.

General Liability
If you, for example, inadvertently damage a property adjoining your site, is your current General Liability Limit sufficient given the increased costs of materials, etc. to reinstate that property?  Notwithstanding what the construction contract says about evidencing a minimum level of cover (which is often a number included in the contract with no thought or calculations as to its adequacy or otherwise) if you damage a neighbouring property you are legally liable for the full extent of that damage.

Get to know Aon Construction

Aon’s specialist Construction practice is second to none in New Zealand - both in terms of experience and size. Get to know some of the team here:
 
Nick Casey | Associate Director
 

Every week, Nick looks forward to his pie and iced mocha at Mr T’s in Onehunga, whom he proclaims makes the best pie in Auckland.

When he is not playing sport, he is in the kitchen and inviting family and friends over for 72hr slow rise pizzas cooked in his Ooni pizza oven. He fancies himself at a bit of DIY and has all the tools but not a lot to show for it.

Nick has been a member of the Aon Construction team for 8 years and has extensive construction insurance experience providing risk management advice across a broad range of construction clients. He has acted for both Principals and Contractors across residential, commercial, and infrastructure placements both here and across the South Pacific. Most recently placing the insurance program for the first grid-scale solar farm in NZ.
 
Daniel Scharnagl | Account Executive
 

When Dan is not looking after our awesome clients, he enjoys going to the gym, fishing, and hiking. He lives in the heart of Auckland in the downtown CBD and enjoys all it has to offer.

Dan brings a diligent eye for detail and enjoys assisting clients with any insurance requirement or query. He has been with Aon for the past 8 years and has experience in Trade Credit and Construction insurance teams and has a proven record of successfully assisting clients with various insurance matters.

Dan has a Bachelor of Business Analysis via the University of Waikato, majoring in both Finance and Economics and has also recently completed the New Zealand Certificate in Financial Services (Level 5) from Open Polytechnic of New Zealand.

He also prides himself on having an 80kg bench press, 150kg deadlift, with a 100kg squat – which due to his lightweight stature puts him into the top 10% of strongest humans comparative to body size (apparently).