Construction insurance specialist on “almost a perfect storm for builders”
“We’re still feeling the after-effects now, certainly in Australia and to an extent New Zealand,” he noted. “We’ve seen, through the back of COVID, rising costs due to a very large materials shortage, coupled with a labour shortage.”
New Zealand, in particular, has experienced a shortage of gyprock, with Denney pointing out that there is one main manufacturer of it in the country. It’s been reported that the dominant player enjoys a 94% market share.
“This has had a massive impact on the shortage,” said the Melbourne-based executive. “We have seen newspaper articles highlighting builders sleeping on sites in an attempt to prevent the theft of materials.”
Aside from the lack of available materials, there’s also been a shortage of labour. Shipping costs have risen, as well.
Denney told Insurance Business: “As the borders closed, we didn’t see as much skilled migration coming in, so we’ve seen a big drop-off in the availability of the labour pool and the availability of trades. We’re also seeing massive increases in freight costs. A 40ft shipping container out of Singapore would average in the past between $3,000 and $5,000; now you are looking at $13,000 to $15,000, as an example.
“Coupled with a shortage in materials and also a rising cost in materials, it’s almost a perfect storm for builders. And that’s still being seen in the market now.”
Looking ahead
The good news is, suggested the MECON leader, things are bound to start levelling off.
“Hopefully, within the next year, things will [improve],” said Denney. “The borders are opening up again and migration has been relaxed, so, hopefully, we’ll see a better flow of skilled migration coming in to help the labour shortage.
“With the shortage of materials, a lot of that will come down to demand, as well. If the housing market continues to grow as it has, then we can get construction production back to a reasonable level. We’ll probably see some effects from that.”
Meanwhile, other things to watch out for include claims costs.
Denney told Insurance Business: “We’re seeing the issue of claims inflation costs, which I think is on everybody’s radar, so we’ll keep an eye on that. Also, the weather patterns are changing. New Zealand has been slammed… That is something we’re keeping a close eye on, as well.
“In New Zealand, it’s historically been earthquake exposure, from a catastrophe perspective, but we’ve seen a huge storm in Auckland and we’ve seen the cyclone hit recently. So, for us, it’s about diligent underwriting and making sure that we understand the risk, pricing and underwriting correctly, and giving the best level of coverage we can for the insured.”
MECON Insurance, the Kiwi business of which is currently focussed on material damage, is looking to launch its standalone liability wording this year, to be written in conjunction with material damage, as part of the Australian company’s expansion plans in New Zealand.
