Construction Industry

Tech Challenges for Surety

As technology becomes more integrated into construction, surety underwriters need more comfort and clarity.
By: | May 23, 2017 • 2 min read

Technology’s integration into every aspect of our lives makes organizations increasingly vulnerable to some sort of cyber flaw.

This is true for the construction industry, and it has led to surety bonding working to incorporate technology as both a source of information and a factor in underwriting.

“We are seeing a blurring of the lines between commercial and contract in the surety world. Contract surety used to be just sticks and bricks,” said Joseph Perschy, director of strategic operations, Argo Surety. “Commercial surety covered everything else.

Joseph Perschy, director of strategic operations, Argo Surety

“But as tech has become more integrated into construction, underwriters can’t just do one or the other anymore. With smart buildings, the underwriters need clarity through the general contractor to the subcontractors installing the systems.”

Argo Surety, part of the Argo Group, provides contract and commercial surety bonds to a variety of businesses and industries in all 50 states. Argo Surety also offers U.S. Customs bonds through a partnership with C.A. Shea & Co.

“Clearly the buck stops with the underwriter,” said Perschy, “but the brokers and the contractors have roles as well. Contractors need to be clear with underwriters on their comfort level with technology, their capabilities and the expertise of their subcontractors.”

If things do not go well, “the contractor is going to be responsible for reimbursing the surety,” noted Perschy.

“Now that is not necessarily crippling; that actually is what the bond is for. The surety steps in, then goes back to the contractor. But that makes it harder and costs more money and time.”

To enable insurance companies and sureties to incorporate work-in-progress statements from contractors and subcontractors in their underwriting, a broad coalition is working to develop a format with XBRL US, the standards organization for financial data.

According to XBRL, developers are assessing input from the first public-comment period that closed recently, and will consider a second such period over the summer or into autumn.

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Separately, XBRL is also developing a new data standard for solar energy in a project with the U.S. Department of Energy. First fruits are not expected until 2018.

The U.S. chapter of XBRL, an international organization, is one of about two dozen national standards groups. The acronym stands for “eXtensible Business Reporting Language” and was originally developed as a financial data standard. It is used by public companies in reporting to the Securities & Exchange Commission, as well as by banks filing with the Federal Deposit Insurance Corp.

The effort to establish standards for contractors and sureties started in 2015. XBRL reported that a proof-of-concept project was completed with The Hartford, and that Liberty Mutual is also participating.

“We are now trying to engage other underwriters and contractors,” added Michelle Savage, vice president of communications for the group.

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

After 20 years in the business, Navy Pier’s Director of Risk Management values her relationships in the industry more than ever.
By: | June 1, 2017 • 4 min read

R&I: What was your first job?

Working at Dominick’s Finer Foods bagging groceries. Shortly after I was hired, I was promoted to [cashier] and then to a management position. It taught me great responsibility and it helped me develop the leadership skills I still carry today.

R&I: How did you come to work in risk management?

While working for Hyatt Regency McCormick Place Hotel, one of my responsibilities was to oversee the administration of claims. This led to a business relationship with the director of risk management of the organization who actually owned the property. Ultimately, a position became available in her department and the rest is history.

R&I: What is the risk management community doing right?

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The risk management community is doing a phenomenal job in professional development and creating great opportunities for risk managers to network. The development of relationships in this industry is vitally important and by providing opportunities for risk managers to come together and speak about their experiences and challenges is what enables many of us to be able to do our jobs even more effectively.

R&I: What could the risk management community be doing a better job of?

Attracting, educating and retaining young talent. There is this preconceived notion that the insurance industry and risk management are boring and there could be nothing further from the truth.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

In my 20 years in the industry, the biggest change in risk management and the insurance industry are the various types of risk we look to insure against. Many risks that exist today were not even on our radar 20 years ago.

Gina Kirchner, director of risk management, Navy Pier Inc.

R&I: What insurance carrier do you have the highest opinion of?

FM Global. They have been our property carrier for a great number of years and in my opinion are the best in the business.

R&I: Are you optimistic about the US economy or pessimistic and why?

I am optimistic that policies will be put in place with the new administration that will be good for the economy and business.

R&I: What emerging commercial risk most concerns you?

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The commercial risks that are of most concern to me are cyber risks, business interruption, and any form of a health epidemic on a global scale. We are dealing with new exposures and new risks that we are truly not ready for.

R&I: Who is your mentor and why?

My mother has played a significant role in shaping my ideals and values. She truly instilled a very strong work ethic in me. However, there are many men and women in business who have mentored me and have had a significant impact on me and my career as well.

R&I: What have you accomplished that you are proudest of?

I am most proud of making the decision a couple of years ago to return to school and obtain my [MBA]. It took a lot of prayer, dedication and determination to accomplish this while still working a full time job, being involved in my church, studying abroad and maintaining a household.

R&I: What is your favorite book or movie?

“Heaven Is For Real” by Todd Burpo and Lynn Vincent. I loved the book and the movie.

R&I: What’s the best restaurant you’ve ever eaten at?

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A French restaurant in Paris, France named Les Noces de Jeannette Restaurant à Paris. It was the most amazing food and brings back such great memories.

R&I: What is the most unusual/interesting place you have ever visited?

Israel. My husband and I just returned a few days ago and spent time in Jerusalem, Nazareth, Jericho and Jordan. It was an absolutely amazing experience. We did everything from riding camels to taking boat rides on the Sea of Galilee to attending concerts sitting on the Temple steps. The trip was absolutely life changing.

R&I: What is the riskiest activity you ever engaged in?

Many, many years ago … I went parasailing in the Caribbean. I had a great experience and didn’t think about the risk at the time because I was young, single and free. Looking back, I don’t know that I would make the same decision today.

R&I: What about this work do you find the most fulfilling or rewarding?

I would have to say the relationships and partnerships I have developed with insurance carriers, brokers and other professionals in the industry. To have wonderful working relationships with such a vast array of talented individuals who are so knowledgeable and to have some of those relationships develop into true friendships is very rewarding.

R&I: What do your friends and family think you do?

My friends and family have a general idea that my position involves claims and insurance. However, I don’t think they fully understand the magnitude of my responsibilities and the direct impact it has on my organization, which experiences more than 9 million visitors a year.




Katie Siegel is a staff writer at Risk & Insurance®. She can be reached at [email protected]