Reinsurers' involvement in projects challenges Israeli contractors
Dec 27, 2023
By: Ganit Michaeli – Manager of Complex Projects
The trend of reinsurers exiting the Israeli construction insurance market has been discussed at length on our agency's website ( for example here ) and is an integral part of the landscape that dictates construction insurance in Israel.
The change in the perception of reinsurers abroad, which began in 2019 and continues to dictate the agenda, has a great impact on developers and contractors who seek to issue proper, accurate, and effective contractor work insurance. This is due, in part, to the increasing involvement of reinsurers in medium-sized projects , and even in projects worth only NIS 40 million or less.
Until recent years, Israeli insurance companies had the authority to provide coverage for projects of up to NIS 100-150 million independently (either by virtue of their contractual reinsurance or under special programs such as a facility). Today, we are talking about a game whose rules have changed beyond recognition, with even projects worth as little as NIS 40 million often required to meet special conditions dictated directly by the reinsurers .
Among the clear characteristics of the phenomenon is the increase in premiums and deductibles. An increase that weighs down the financial burden on the insured (and in exceptional cases harms the economic viability of carrying out a particular project), and also – no less importantly – bites into coverage on the day of the event in light of the surge in excesses (deductibles).
A critical element derived from these trends is a broad and deep tightening of insurance conditions. There are many examples, and I will touch on a few of them.
By: Ganit Michaeli – Manager of Complex Projects
The trend of reinsurers exiting the Israeli construction insurance market has been discussed at length on our agency's website ( for example here ) and is an integral part of the landscape that dictates construction insurance in Israel.
The change in the perception of reinsurers abroad, which began in 2019 and continues to dictate the agenda, has a great impact on developers and contractors who seek to issue proper, accurate, and effective contractor work insurance. This is due, in part, to the increasing involvement of reinsurers in medium-sized projects , and even in projects worth only NIS 40 million or less.
Until recent years, Israeli insurance companies had the authority to provide coverage for projects of up to NIS 100-150 million independently (either by virtue of their contractual reinsurance or under special programs such as a facility). Today, we are talking about a game whose rules have changed beyond recognition, with even projects worth as little as NIS 40 million often required to meet special conditions dictated directly by the reinsurers .
Among the clear characteristics of the phenomenon is the increase in premiums and deductibles. An increase that weighs down the financial burden on the insured (and in exceptional cases harms the economic viability of carrying out a particular project), and also – no less importantly – bites into coverage on the day of the event in light of the surge in excesses (deductibles).
A critical element derived from these trends is a broad and deep tightening of insurance conditions. There are many examples, and I will touch on a few of them.
Hot work procedure
Until a few years ago, contractor work insurance involved a standard hot work procedure, which was relatively identical among Israeli insurance companies. Today, we already have to meet very strict conditions. To the extent that reinsurers are involved in the project, the above-mentioned work procedure embodies emphases that contractors and developers must be well-acquainted with and in-depth.
Until a few years ago, contractor work insurance involved a standard hot work procedure, which was relatively identical among Israeli insurance companies. Today, we already have to meet very strict conditions. To the extent that reinsurers are involved in the project, the above-mentioned work procedure embodies emphases that contractors and developers must be well-acquainted with and in-depth.
Construction sites in Israel frequently suffer from water damage, such as groundwater eruptions, faulty plumbing, faucets left "open" when a main faucet is opened, storms, gales, etc. Often, this results in property damage that can reach hundreds of thousands (and even millions) of shekels.
The increasing involvement of reinsurers in projects is reflected in strict requirements regarding special and creative procedures for preventing water damage on sites, including: preliminary surveys, changing execution methods, implementing technological systems for identifying and monitoring damage, instructions for specific treatment stages, policy exclusions, and the list goes on.
Water damage treatment procedure
The increasing involvement of reinsurers requires Israeli insurance companies to seek updates and receive prior approvals even in procedures that were previously performed "in-house." As a result, we naturally see longer timelines for processing applications, increased requirements for filling out forms and opinions, various delays, and of course, tougher conditions, even to the point of refusals.
For example:
o Policy extension – Policies for insurance of (medium) contractor works are usually issued for approximately 24-36 months. If the project is delayed, and in Israel this is a common phenomenon that is not necessarily related only to the executing contractor or the developer, there is the option to submit a request for an extension. In these days when reinsurers are increasingly involved in projects, this issue can become a saga. Israeli insurance companies, unlike in the past, cannot necessarily provide the response to the extension immediately. Sometimes this involves direct approval by the reinsurers, which may result in changes to the insurance conditions to the detriment of the insured and the pricing of the extension period at a high rate.
o Policy changes – The increasing involvement of reinsurers means that many policy changes force the Israeli insurance company to obtain prior approval from reinsurers abroad.
Excess bureaucracy
Contractors and developers are asking us what they can do in light of the complex conditions that have arisen. Well, despite the changes in the balance of power between insureds and insurers, there are still steps that may help deal with the situation.
First and foremost, contractors and developers are allowed to respond . This is of course after they have thoroughly understood the requirements presented and the implications derived in light of their ability to meet the conditions in terms of planning, execution, and the scope of coverage in event controls.
The contractor/developer's response should be provided as soon as possible, as a delay in providing a response may result in a lack of attention to matters in real time, and a delay in providing a response from their insurers and/or reinsurers.
To the extent that the contractor or developer believes that there is a difficulty with a particular requirement, they can certainly refer the matter to the insurers. In certain situations, especially if they are accompanied by an insurance agency with seniority and experience, the above step will lead to a softening of the requirements and/or their adaptation to the contractor's practice.
Remember that mere objection will not be enough. The contractor/developer must back up the claims with professional documents such as opinions, comparisons to past projects, comparisons to market conditions, etc. Sometimes it is useful to offer alternative options during the dialogue, which on the one hand will allow the work to be carried out and on the other hand will assist in issuing the policy for the benefit of all parties.
What can contractors and developers still do?
In conclusion,
The increasing involvement of reinsurers in projects (even) of low value is a challenge that the construction insurance market in Israel has been increasingly required to deal with in recent years.
It is important to recognize this fact of life in the early stages of the process, when preparing to order insurance. It is useful and important to consult in advance with an insurance agency with knowledge and experience in the field of construction insurance. Proper preparation may prevent critical mistakes made at the beginning and prevent unnecessary complications that may cost a lot of money due to poor planning of the method of arranging insurance, such as purchasing partial insurance (for example, only for excavation and filling) which may lead to a refusal to insure the continuation of the work, a demand to pay a disproportionate premium, a refusal to insure the project in the first place, and more.
The less flexibility the insured has, the greater the challenges. On the other hand, there are effective solutions that can be implemented. In these matters, as in life - the end is in the end.
The increasing involvement of reinsurers in projects (even) of low value is a challenge that the construction insurance market in Israel has been increasingly required to deal with in recent years.
It is important to recognize this fact of life in the early stages of the process, when preparing to order insurance. It is useful and important to consult in advance with an insurance agency with knowledge and experience in the field of construction insurance. Proper preparation may prevent critical mistakes made at the beginning and prevent unnecessary complications that may cost a lot of money due to poor planning of the method of arranging insurance, such as purchasing partial insurance (for example, only for excavation and filling) which may lead to a refusal to insure the continuation of the work, a demand to pay a disproportionate premium, a refusal to insure the project in the first place, and more.
The less flexibility the insured has, the greater the challenges. On the other hand, there are effective solutions that can be implemented. In these matters, as in life - the end is in the end.
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