Finding opportunities in the commercial insurance space can be a challenge. Eric Price-Glynn of MarketStance led a session at our fall conference on utilizing data, particularly as it relates to the construction sector, to pinpoint opportunities for growth in commercial lines.
The construction industry is second only to the service sector in size. The industry is very tied to macro events in the economy, so if you know what’s happening in construction, you will have a decent handle on the broader economy. Segmentation within the industry matters. Heavy and light construction trends may vary significantly. Similarly, residential and non-residential construction trends are necessarily the same. In addition to the type of construction, geographic locations matter. See Eric’s presentation to view Marketstance maps that show where construction is rebounding.
Residential construction, a common leading economic indicator, typically leads non-residential construction, but this hasn’t been the case recently. Using data from FRED, Glynn discussed the decreasing demand for residential housing. Some of this decline in demand is due to a lag from the post-recession recovery. Some is the result of an overall decline in home-ownership rates across all generations. In the residential space, positive momentum can be seen in multi-family construction, new single family construction and residential re-modelers.
On the non-residential side, heavy construction is often seen as a key driver for construction activity. Heavy/civil construction projects accounted for about half of all non-residential construction in 2016. According to economic data, however, heavy construction is losing momentum nationally.
In terms of insurance opportunity, Glynn drew on MarketStance analysis and pointed to habitational as a leading class. Apartment and condo associations accounted for one out of every five capital expansion dollars in the US, a key Builders’ Risk market. Momentum in the commercial inland marine market is led by construction risks in the West and South, where accounts with positive momentum compromise 60% of the inland marine market. Glynn sees residential construction opportunities rising for carriers as well. The most important question: where are you targeting your business? Success could depend on it.