Business insurance giant QBE Europe is pulling-out of the construction bonds market for major contractors.
QBE is a major player in the surety bonds market and the move will be a massive blow to main contractors already struggling to get cover.
One contractor said: “QBE are a key provider in the construction market so this will be a significant issue for contractors.”
Performance bonds guarantee a contractor’s obligations under the contract and protect against insolvency, reducing the risks for the employer who takes them on to do the work.
Adequate bond cover is a condition of most contracts but providers are tightening conditions following a string of high-profile construction insolvencies.
The Enquirer understands that QBE will be contacting contractors over the coming days to explain its move following an “unsustainable loss ratio performance over a number of years.”
QBE currently provides bonds for 20 of the industry’s 30 biggest contractors and will continue providing cover for smaller firms up to £1.5m
Another contractor said: “The bond market is very tough at the moment with surety providers hit hard by failures like Buckingham, Henry and Readie.
“Facility levels are being restricted and reduced with insurers looking ever more closely at your finances.
“Now this news has upped things again and we could see projects stalled with major contractors unable to get bond cover.”
A spokesperson for QBE Europe said: “Following a review, we have decided to cease writing new construction-bond business from our London office.
“This decision does not impact in any way our construction bond MGA for SMEs with Evo-Surety.
“As always, we will continue to monitor developments in the sector and periodically review our market position.“
