US Construction Risks

1. Deal in FACTS not PERCEPTIONS - on many occasions we have marketed a risk to an insurer who was hesitant to commit because of perceptions they had regarding prototype issues - once we addressed these issues with facts, the insurers usually came on board.

2. Get the FACTS - somebody, somewhere on the Project Team has all the information regarding any "unproven" issues.  Clients do not typically commit up to US$ billions to a project that they are not pretty certain is going to work well!  Don't be afraid to hunt down the facts, explaining to the stakeholders that such information will ultimately get them the cover they want at an affordable price.

3. Get the MANUFACTURER involved - With the client's permission and co-operation, consider getting the manufacturers involved in convincing the insurers that the equipment in question should not give them cause for concern.  Manufacturers have a lot to gain by showing potential customers that their products are acceptable risks to Insurers, and a lot to lose if they can't.  Manufacturers will sometimes be extremely co-operative in assisting you with the "technical broke" to Insurers either by providing FACTS or even accompanying you to broking meetings with insurers.  Also, manufacturers may be able to direct you to insurers who they know are accepting of the technology in question.

4. Be REALISTIC - if faced with an undeniable prototype project, have realistic expectations - shooting for the stars, hoping to hit the ceiling is not necessarily a smart strategy here, because there are a surprisingly small number of credible lead insurers who are prepared to get into in-depth discussions regarding prototype issues (especially on the major / mega projects), and if your initial approach is too aggressive, it may turn them off completely, leaving you no-where to go! 

5. Be CREATIVE - following on from the point above, if you are dealing with undeniably prototype equipment, there may be other ways to address "risk of loss" issues with your client:  examples include obtaining generous warranties / new technology indemnities from the manufacturer (who will be keen to be seen to be selling such equipment), but note that such protection would not cover the resultant Delay in Start up Risk.

Tony Rastall is a leading US engineering construction expert and has acted as either lenders adviser or project broker to numerous projects with values up to US$20bn. He has lectured widely on international insurance and related matters including addressing the World Bank in Washington DC on major project risk issues. Tony also has completed a Gas Turbine design course with the American Society of Mechanical Engineers.

Since 2004 JLT's construction unit has been at the forefront of product development in respect of casualty capabilities for residential homebuilders in the US, both custom and tract. We were the first intermediary to successfully encourage excess markets, both in London and Bermuda, to follow form of Zurich's Home Builders' Protective Policy. 

Prior to the development of this form limited coverage for homebuilders was available in the market place, with standard GL forms requiring tailored endorsements, often at great expense.

Working with excess markets, JLT are in a position to offer up to $250mm in limits on the ZHBP form which amongst others things,  provides warranty coverage with a first party trigger element, and includes cover for PD resulting from mold. The EFIS exposure can be underwritten, and key areas of cover for the likes of common areas, leased back homes such as model homes are not excluded. The ZHBP form targets builders with revenues which range from $100mm to $1bn.

Additionally, JLT has developed an alternative policy form containing the same policy enhancements as mentioned above ideally suited to sit in excess of a large Self Insured Retention, targeting homebuilders with $1bn and above in revenues.

With an eye to the current economic landscape and in anticipation of green shoots of recovery, we are just weeks away from being able to announce an exciting new product for niche homebuilders with revenues up to $100mm in limits. It is envisaged a choice of coverage forms will be available with limits of up to $75mm offered.

For more information on the above please don't hesitate to call  Galen Brislane on +44 20 7528 4876.

This blog was written by Galen Brisbane who worked as a Casualty broker within the Construction Division at JLT, from 2005 to September 2010. For any Construction related insurance queries, please contact Bernadette Hackett, Partner within the JLT Construction Division.

Twelve new insurers and existing carriers improving their game - result: competitive market competing across the board with the local US insurers, no matter the size, type or location of a construction project and especially competitive for heavier type risks.

Ask yourself two questions:

1. are you fully aware of the opportunities this creates?
2. does your London market broking partner have the construction knowledge, strength in depth or leverage to make the difference?

We all know how the London market reputation is built on its flexibility:

- Any type of project - from low risk construction of condominiums through to the heaviest construction risks such as bridges and tunnels;

- Risks in any State - cat exposed or otherwise;

- Long term insurance at fixed cost without any break clauses - possibly 8-10 years, providing the financial certainty needed for larger infrastructure and P3 projects;

- Policy wording adapted for the project - specifically to meet the risk needs of a project and often broader than local market alternatives e.g. no water ingress exclusions or limitations.

- Single policy - covering construction and existing asset risks, which can be important, for example, with the development of existing infrastructure such as roads

But it is the specialist construction broker that has the unique market insight, expertise, special facilities and relationships that make the difference.  There skill and experience can achieve the best result for the insured and enable the US broker to maximise their earning potential.

But just how do you choose the perfect partner?  Here's my seven-point checklist:

1. A dedicated construction team, with proven US experience
2. Expertise across all disciplines - strength in depth to add real value and give your business the attention it requires
3. The amount of premium placed - a measure of market leverage
4. Spread of business - a measure of relationship quality
5. Existence of unique facilities and record of developing facilities for US brokers (e.g. excess of loss) - the value added
6. Global experience - share best practice
7. Technical claims support - delivering the promise

Have a comment you want to make or a burning question about the London market?  Then post an entry on this site or email me direct. 

John is Head of Placement with a primary role of bringing co-ordination and a market focus to the Construction Division. He also ensures the building of long-term strategies in the placing of major projects.