ACE warns of insurance meltdown as rates rise

The Association of Consulting Engineers (ACE) warned the construction industry this week that it is facing a potential professional indemnity insurance (PII) meltdown.
An ACE report, Professional Indemnity Insurance and Joint and Several Liability in the Construction Industry - the case for reform, found that some premiums have risen by 300%. In some cases, premiums are now equivalent to 6% of some ACE members' annual turnover.
According to the report, this is a substantial amount for many firms - for example, £60,000 for a company with an annual turnover of just £1m.
The report's findings also show that many companies' excesses have increased to a level "never before seen".
It is possible for a company's excess to have gone from £12,000 to £500,000, said the report.
The PII problem has also been aggravated by the fact that many organisations face an increasing number of limitations to cover, including work in relation to asbestos and terrorist exclusions.
ACE is calling for the government to promote a bill to change the law on joint and several liability to stop escalating premiums.
This, it said, can be done by including a full consideration of a rational and fair statutory capping regime to alleviate problems of disproportionate liability.
ACE has talked with construction minister Nigel Griffiths about the issue and has presented him with a copy of its nine-page report.
Griffiths is considering a response to the report stating that ACE was the first organisation to raise the issue with him in such dramatic terms.
"The situation is unsustainable," said ACE chief executive Nelson Ogunshakin.
"The current system of joint and several liability discriminates against firms, irrespective of blame, making them responsible for the failings of other parties over which they have no control," he said.