Lower risk architectural and engineering firms (those that have lower claim frequency and severity, that have strong balance sheets, that are not engaged in more difficult projects such as bridge design or condo work, that have low employee turnover, and that have excellent internal controls that can be clearly shown to insurance carriers) are still reeling in stiff competition amongst A/E 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.
Any investment portfolio that is showing significant losses is required to be "market to market" to meet the Financial Accounting Standard Board (FASB) rules. Sub-par performance and the inability to reach 15% return on investment by the industry (the standard benchmark for performance) will obligate A/E insurance carriers to increase their rates.
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.
The A/E space is facing further deterioration due to an increase in the frequency of claims resulting from the decline in the construction industry. With financing squeezed, decreased tax rolls for government projects, and the attempts to regain losses by aggressive sureties, many owners, contractors, and developers that were once willing to negotiate with the design team when issues came up are now turning to 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.
Any investment portfolio that is showing significant losses is required to be "market to market" to meet the Financial Accounting Standard Board (FASB) rules. Sub-par performance and the inability to reach 15% return on investment by the industry (the standard benchmark for performance) will obligate A/E insurance carriers to increase their rates.
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.
The A/E space is facing further deterioration due to an increase in the frequency of claims resulting from the decline in the construction industry. With financing squeezed, decreased tax rolls for government projects, and the attempts to regain losses by aggressive sureties, many owners, contractors, and developers that were once willing to negotiate with the design team when issues came up are now turning to litigation.
It is my guess that any built environment counsel will see similar trends and hints leading to these conclusions.
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