Construction: Building a Brighter Future
With the Great Recession a fading memory, risk managers in the recovering construction sector are embracing new challenges: the risks of a world where “P3” projects require sky-high limits and regulatory and litigation trends demand forward-thinking solutions from insurers with proven financial fortitude.
“The construction industry is well on the road to recovery,” said Bill Sullivan, Vice President & Head of Construction, at Berkshire Hathaway Specialty Insurance (BHSI). “Looking at year-over-year payrolls and receipts, we see growth for the remainder of the year and anticipate this trend to continue throughout 2016.”
BHSI is committed to partnering with construction industry risk managers as they capture the opportunities of this comeback environment. The company brings to the table unparalleled financial strength and capacity, a blue-chip reputation (earned for its long-term perspective), and deep underwriting and claims expertise.
In it Long Term: Massive “P3” Projects
“A decade ago, a public-private partnership (P3) project in the $400 million to $500 million range was an outlier,” said Geoff Delisio, Senior Vice President & Head of Surety at BHSI. “Today, projects valued in the billions are commonplace.”
“Insuring P3 or large projects is extremely complex and requires a holistic approach,” noted Sullivan. BHSI offers integrated programs that fit ‘hand-in-glove’ with these projects and can include excess liability, environmental, professional liability and other coverages,” he said.
As projects get bigger, they also tend to have longer completion cycles. And with the ongoing consolidation in the insurance industry, contractors worry whether a carrier will be there years later to handle a claim coming from a policy put together on day one of a project. Add to the mix insurance requirements dictated by lenders (who carry the most risk) and it’s easy to see why BHSI’s trusted brand and balance sheet strength play a pivotal role for contractors embarking on these projects.
“The well-capitalized balance sheet of BHSI provides contractors with the capacity they need to take on substantial risks in a sustainable way,” said Delisio. “Our sheer magnitude of surplus creates pricing stability,” he said, adding that BHSI’s construction customers need not be concerned about sudden shifts in terms or conditions. With its strong balance sheet, BHSI doesn’t need to rely on reinsurance markets. “The resulting stability in terms, conditions, coverages and pricing enables our insureds to be confident in their programs over the long term,” he explains.
On the Rebound: GL-Only Consolidated Insurance Programs (CIPs)
Recent regulatory changes, such as anti-indemnity provisions and coverage interpretations surrounding construction defects, have made it increasingly difficult for a contractor to gauge what constitutes proper coverage and limits for a project. Then there is the further challenge of ensuring adequate protection for subcontractor exposures on large projects.
This trend has sparked a rise in demand for CIPs sponsored by owners or general contractors for general liability as well as environmental and professional liability coverages. In particular, many large general contractors are seeking out rolling programs that encompass numerous projects for several-year periods.
“This is not a new phenomenon,” Sullivan explained, “but the upswing in demand is quite significant. These programs are an area where BHSI’s advantages – our financial strength, capacity, and product breadth – really make an impact.”
Answering a Call for Capacity: Homebuilder’s Casualty
For contractors building large housing tracts, construction lawsuits are rampant, particularly in Arizona, California and Washington. As a result, several carriers have abandoned or are in the process of pulling out of the construction casualty market, shrinking the capacity available for both homebuilders and subcontractors.
To help replenish the market, BHSI has launched a new product that will provide homebuilders with the capacity, coverage and expertise they need to succeed as the market turns the corner to growth mode. “BHSI’s new, stable capacity has been welcomed by domestic homebuilders who have had to scour markets outside the U.S. for the limits they need,” Sullivan said.
The Right Foundation: Simplicity & Clarity in Claims
While bringing to market integrated, holistic solutions and much-needed capacity, BHSI also laid the groundwork for gold standard handling of the potential claims contractors face.
“As we develop policy forms, we make simplicity and clarity top priority, so we and our customers are as clear as possible about what coverage we are offering. Moreover, our underwriters, claims and legal team members are ‘connected at the hip’ when we underwrite contracts,” Delisio added. As a result, the claims process is smooth and efficient for BHSI customers.
The construction industry faces dynamic challenges and opportunities. Risk managers are well equipped to meet those challenges with the significant financial resources, innovative programs and products, and long-term commitment of BHSI.
To learn more about BHSI’s Construction and Surety capabilities, contact:
VP & Head of Construction
SVP & Head of Surety
AVP, Construction Casualty
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Berkshire Hathaway Specialty Insurance. The editorial staff of Risk & Insurance had no role in its preparation.