Construction Challenges

Owning the Risk

Owner control of insurance and project safety was vital to the success of Denver’s commuter rail project.
By: | February 22, 2016 • 7 min read

Denver’s Eagle P3 project is ambitious not only in its scope and structure, but in its approach to risk and insurance.


The $2.2 billion project links Denver’s airport, downtown and metropolitan areas with three new commuter rail lines, which are due to open in 2016, as part of the Regional Transportation District’s (RTD) ‘FasTracks’ infrastructure expansion. The project is unusual from an insurance perspective in that the RTD opted to assume control of the insurance program and participate in the safety program.

Owner-controlled insurance programs (OCIPs) were more rare back in 2011, said Don Holmes, Denver head and managing director of the construction practice for RTD’s broker Marsh.

Public entities would typically defer such responsibilities to the project concessionaire. However, the approach is growing in popularity, thanks in part to the success of Eagle P3.

Don Holmes, managing director, Marsh

Don Holmes, managing director, Marsh

“Investors and lenders asked lots of questions in order to get comfortable with how the coverage would work, and if we’d given the wrong answers there could have been a great deal of resistance,” Holmes said.

“But the client was doing it for the right reasons.”

Without the public entity controlling the insurance program, some of the contractors on the project could not have secured high enough general liability or workers’ compensation insurance limits to participate. But by creating a program greater than the sum of its parts, RTD was able to serve the community by offering contracts to a broad range of regional companies.

The selected concessionaire, Denver Transit Partners (DTP), is a partnership owned by lead constructor and designer Fluor Enterprises, Denver Rail (Eagle) Holdings — a unit of John Laing PLC and an investment arm of Aberdeen Global Infrastructure Partners.

The concession group is complemented by a host of supporting contractors.

It was essential prospective underwriters on the project fully understood its structure, funding and safety program. Marsh conducted an extensive risk assessment of all six FasTracks corridors prior to structuring the Eagle P3 insurance program.


This information was shared with bidders on the project, while RTD engineers took the underwriters on extensive tours of the rail corridor — a transparent approach that undoubtedly contributed to every prospective insurer submitting a quote to participate.

“I give RTD a lot of credit — not every client invests in that kind of analysis pursuant to placing an insurance program,” said Holmes, who admits the biggest challenge was to meet the needs of a great number of stakeholders.

“The challenge is convincing markets the risk is well managed. We succeeded in this and achieved very good pricing, and the program has responded well.” — Don Holmes, managing director, Marsh

“There are so many competing interests in a PPP. We had to establish provisions regarding escalation of payments and commercial invalidation of insurance, because we would be living with what we committed to for a very long time and we needed to get it right,” he said.

“That took a great deal of time, effort and conversation.”

Zurich won the role of lead underwriter for the casualty, general and excess liability and workers’ compensation wrap-up, while the first party builder’s risks are led by Liberty International Underwriters (LIU).

Additional underwriters participate in excess layers across the program.

Paul Hampshire, vice president, engineering and civil construction, Liberty International Underwriters

Paul Hampshire, vice president, engineering and civil construction, Liberty International Underwriters

“We felt the quality of the client, the way they had procured their P3 concession, their overall approach and the caliber of the design and construction concession team were very favorable,” said Paul Hampshire, vice president of engineering and civil construction at LIU, which also assumed responsibility for construction risk engineering.

“We like to be considered an extended part of the project delivery team, albeit at arm’s length,” said Hampshire.

“We are not there to audit; we are there to add value, because insurer and insured have aligned interests — we both want the project to be a success.”

But, he added, “there is a small but significant difference between risk management and the management of risk, which sits 100 percent with the concession team of designers and constructors, through to maintenance and operations, who are fully responsible for the management of risk as they see fit — we don’t own their risk, they do.”

Delegating Risk Management

Loss control on a project of this nature is a true team effort. RTD chose to oversee this element, employing its own loss control engineer to work closely with Marsh across the OCIP program and with LIU on construction risks.

According to DTP’s executive project director Aaron Epstein, the contractors and sponsors of the project partnered to allocate risks among the parties best equipped to mitigate potential exposures.

“On a quarterly basis, management formally reviews the outstanding risks and revises the risk framework to ensure all potential risks to the project are identified and mitigated,”  he said.


Epstein noted it is important participants understand all risks up-front during the development phase of the project in order to structure the team in the best manner possible; and that risk analysis is updated on a consistent and frequent basis to keep abreast of any new risks that may arise.

Hampshire added that on projects of this scale, underwriters prefer to work with concessions that have worked together previously “so they are not on a learning curve, discovering how each other work while trying to deliver to intense timelines.”

It should also be noted, he said, that contractors have been hired for requisite experience and skill rather than on price, and that there is adequate time and budget in the project schedule to ensure the project is completed to the right standard.

Holmes admitted that driving loss control by committee can sometimes raise concerns over who is controlling what, “but our loss control engineers performed exceptionally well,” he said.

Bumps on the Track

Construction on the project revolves primarily around station upgrades, drainage work and the interaction of railroads with utilities, communities and existing structures across 36 miles of rail corridor.

Aaron Epstein, executive project director, Denver Transit Partners

Aaron Epstein, executive project director, Denver Transit Partners

“Coordination with the local communities, cities and counties, as well as the two freight railroads we are in close proximity to, is one of our major focuses,” said Epstein.

Working with third parties who have had to adapt their own facilities to accommodate the railroad has been a “headache,” said Hampshire, and caused several delays — in some cases requiring the project’s critical timeline to be sliced into sub-activities, and gaps left in infrastructure, to avoid project-wide delays.

There are also environmental considerations, such as dredging up polluted spoils from under old rail tracks.

“The key for the client is for policies to have broad wordings and not be too specific,” said Holmes.

“The challenge is convincing markets the risk is well managed. We succeeded in this and achieved very good pricing, and the program has responded well.”

However, Hampshire said there was “a wide range of issues, from technical to natural catastrophe to day-to-day security and control,” to contend with on the project — to which Liberty’s claims team reacted “proactively.”

Heavier than expected rainfall, for example, caused flood damage to the train maintenance facility as well as isolated incidents along the rail corridor. Then there was the decision by the concession team to demolish and rebuild a number of bridges they constructed, having decided they were not fit for purpose and would cost more to repair than rebuild, as well as some theft of plant and equipment.

“Certainly we have faced some issues, just as all projects do,” said Epstein.


“The important thing is that our internal processes have allowed us to identify these issues early and correct them before they turned into major setbacks.”

And the project has indeed so far achieved that rare feat of being on time and on budget.

“Performance has been splendid and I’m very proud of our work and that of RTD’s risk manager Bob Medina,” said Holmes.

“Safety and engineering has been excellent and I’m not aware of any major claims.”

Hampshire said that P3 projects, having briefly fallen out of political favor, will become more prevalent due to increased demand for infrastructure in the U.S., coupled with a challenging funding environment. His concern, however, is a potential lack of experienced teams to deliver them.

“PPP projects are big, ugly and risky. Everyone involved needs to understand what the risks are — and that’s not always the case.”

But having glided smoothly towards completion, Eagle P3’s risk approach may prove to be a prototype for others to follow.R2-16p92-93_08Construction.indd

Antony Ireland is a London-based financial journalist. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance


Kiss Your Annual Renewal Goodbye; On-Demand Insurance Challenges the Traditional Policy

Gig workers' unique insurance needs drive delivery of on-demand coverage.
By: | September 14, 2018 • 6 min read

The gig economy is growing. Nearly six million Americans, or 3.8 percent of the U.S. workforce, now have “contingent” work arrangements, with a further 10.6 million in categories such as independent contractors, on-call workers or temporary help agency staff and for-contract firms, often with well-known names such as Uber, Lyft and Airbnb.

Scott Walchek, founding chairman and CEO, Trōv

The number of Americans owning a drone is also increasing — one recent survey suggested as much as one in 12 of the population — sparking vigorous debate on how regulation should apply to where and when the devices operate.

Add to this other 21st century societal changes, such as consumers’ appetite for other electronic gadgets and the advent of autonomous vehicles. It’s clear that the cover offered by the annually renewable traditional insurance policy is often not fit for purpose. Helped by the sophistication of insurance technology, the response has been an expanding range of ‘on-demand’ covers.

The term ‘on-demand’ is open to various interpretations. For Scott Walchek, founding chairman and CEO of pioneering on-demand insurance platform Trōv, it’s about “giving people agency over the items they own and enabling them to turn on insurance cover whenever they want for whatever they want — often for just a single item.”


“On-demand represents a whole new behavior and attitude towards insurance, which for years has very much been a case of ‘get it and forget it,’ ” said Walchek.

Trōv’s mobile app enables users to insure just a single item, such as a laptop, whenever they wish and to also select the period of cover required. When ready to buy insurance, they then snap a picture of the sales receipt or product code of the item they want covered.

Welcoming Trōv: A New On-Demand Arrival

While Walchek, who set up Trōv in 2012, stressed it’s a technology company and not an insurance company, it has attracted industry giants such as AXA and Munich Re as partners. Trōv began the U.S. roll-out of its on-demand personal property products this summer by launching in Arizona, having already established itself in Australia and the United Kingdom.

“Australia and the UK were great testing grounds, thanks to their single regulatory authorities,” said Walchek. “Trōv is already approved in 45 states, and we expect to complete the process in all by November.

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group.” – Scott Walchek, founding chairman and CEO, Trōv

“On-demand products have a particular appeal to millennials who love the idea of having control via their smart devices and have embraced the concept of an unbundling of experiences: 75 percent of our users are in the 18 to 35 age group,” he added.

“But a mass of tectonic societal shifts is also impacting older generations — on-demand cover fits the new ways in which they work, particularly the ‘untethered’ who aren’t always in the same workplace or using the same device. So we see on-demand going into societal lifestyle changes.”

Wooing Baby Boomers

In addition to its backing for Trōv, across the Atlantic, AXA has partnered with Insurtech start-up By Miles, launching a pay-as-you-go car insurance policy in the UK. The product is promoted as low-cost car insurance for drivers who travel no more than 140 miles per week, or 7,000 miles annually.

“Due to the growing need for these products, companies such as Marmalade — cover for learner drivers — and Cuvva — cover for part-time drivers — have also increased in popularity, and we expect to see more enter the market in the near future,” said AXA UK’s head of telematics, Katy Simpson.

Simpson confirmed that the new products’ initial appeal is to younger motorists, who are more regular users of new technology, while older drivers are warier about sharing too much personal information. However, she expects this to change as on-demand products become more prevalent.

“Looking at mileage-based insurance, such as By Miles specifically, it’s actually older generations who are most likely to save money, as the use of their vehicles tends to decline. Our job is therefore to not only create more customer-centric products but also highlight their benefits to everyone.”

Another Insurtech ready to partner with long-established names is New York-based Slice Labs, which in the UK is working with Legal & General to enter the homeshare insurance market, recently announcing that XL Catlin will use its insurance cloud services platform to create the world’s first on-demand cyber insurance solution.

“For our cyber product, we were looking for a partner on the fintech side, which dovetailed perfectly with what Slice was trying to do,” said John Coletti, head of XL Catlin’s cyber insurance team.

“The premise of selling cyber insurance to small businesses needs a platform such as that provided by Slice — we can get to customers in a discrete, seamless manner, and the partnership offers potential to open up other products.”

Slice Labs’ CEO Tim Attia added: “You can roll up on-demand cover in many different areas, ranging from contract workers to vacation rentals.

“The next leap forward will be provided by the new economy, which will create a range of new risks for on-demand insurance to respond to. McKinsey forecasts that by 2025, ecosystems will account for 30 percent of global premium revenue.


“When you’re a start-up, you can innovate and question long-held assumptions, but you don’t have the scale that an insurer can provide,” said Attia. “Our platform works well in getting new products out to the market and is scalable.”

Slice Labs is now reviewing the emerging markets, which aren’t hampered by “old, outdated infrastructures,” and plans to test the water via a hackathon in southeast Asia.

Collaboration Vs Competition

Insurtech-insurer collaborations suggest that the industry noted the banking sector’s experience, which names the tech disruptors before deciding partnerships, made greater sense commercially.

“It’s an interesting correlation,” said Slice’s managing director for marketing, Emily Kosick.

“I believe the trend worth calling out is that the window for insurers to innovate is much shorter, thanks to the banking sector’s efforts to offer omni-channel banking, incorporating mobile devices and, more recently, intelligent assistants like Alexa for personal banking.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.”

As with fintechs in banking, Insurtechs initially focused on the retail segment, with 75 percent of business in personal lines and the remainder in the commercial segment.

“Banks have bought into the value of these technology partnerships but had the benefit of consumer expectations changing slowly with them. This compares to insurers who are in an ever-increasing on-demand world where the risk is high for laggards to be left behind.” — Emily Kosick, managing director, marketing, Slice

Those proportions may be set to change, with innovations such as digital commercial insurance brokerage Embroker’s recent launch of the first digital D&O liability insurance policy, designed for venture capital-backed tech start-ups and reinsured by Munich Re.

Embroker said coverage that formerly took weeks to obtain is now available instantly.

“We focus on three main issues in developing new digital business — what is the customer’s pain point, what is the expense ratio and does it lend itself to algorithmic underwriting?” said CEO Matt Miller. “Workers’ compensation is another obvious class of insurance that can benefit from this approach.”

Jason Griswold, co-founder and chief operating officer of Insurtech REIN, highlighted further opportunities: “I’d add a third category to personal and business lines and that’s business-to-business-to-consumer. It’s there we see the biggest opportunities for partnering with major ecosystems generating large numbers of insureds and also big volumes of data.”

For now, insurers are accommodating Insurtech disruption. Will that change?


“Insurtechs have focused on products that regulators can understand easily and for which there is clear existing legislation, with consumer protection and insurer solvency the two issues of paramount importance,” noted Shawn Hanson, litigation partner at law firm Akin Gump.

“In time, we could see the disruptors partner with reinsurers rather than primary carriers. Another possibility is the likes of Amazon, Alphabet, Facebook and Apple, with their massive balance sheets, deciding to link up with a reinsurer,” he said.

“You can imagine one of them finding a good Insurtech and buying it, much as Amazon’s purchase of Whole Foods gave it entry into the retail sector.” &

Graham Buck is a UK-based writer and has contributed to Risk & Insurance® since 1998. He can be reached at