US Construction Risks

Stop press: two new lead umbrella US construction casualty markets

2009-10-15T16:11:43Z

Two London market underwriters, CV Starr and Torus, have just announced initiatives that will provide new lead umbrella casualty capacity for US Construction risks. If you would like more information then please contact me (+44 207 528 4876) or my colleague, Paul Woodward (+44 207 558 3970).

This blog was written by Galen Brisbane who worked as a Casualty broker within the Construction Division at JLT, from 2005 to September 2010.

Enterprise Risk Management to the rescue: - Well sort of..

2009-10-14T07:27:07Z

A recent article in Risk Specialist, our regular client magazine, discussed ways of effectively implementing Enterprise Risk Management (ERM) - view the article. Whilst ERM is widely talked about, personally, I lack sufficient knowledge to decide whether I think it's of real business value or not. When I said this to a colleague, Andrew Tait of Core Risks Limited, he tried to explain what I was missing:

"ERM is a business practice which plugs into your clients' current organizational structure, which feeds information into their budget and strategic cycle, provides a venue for cross functional (dare I say cross silo) dialogue, and actually helps them compare the risk and opportunity costs of disparate operational "necessities" as that 'critical' budget request from IT/IS ........to that 'urgent' production capacity issue from Engineering...... to that request for on-line subcontractor training submitted by Safety .........to that 'amazing' opportunity for a new construction category raised by planning."

"And by the way , this practice also helps your client improve their debt and financial ratings from the rating agencies (such as S&P), and satisfy some of the tough Corporate Governance questions being raised by their Board of Directors."

It all sounds impossible but according to Andrew that's because I haven't seen an effective ERM program customized to the specific business needs, value drivers and culture of the company in which it is embedded.

He said that ERM, when done correctly, is sort of like a change management program on steroids. It promotes a risk management culture within the company, changes how different departments view and prioritize the treatment of Risk and Opportunities - both in their area and others, and helps to prioritize and justify where your limited assets should and should not be allocated. It can do all this things while also meeting the increased Corporate Governance expectations of Rating Agencies and your Board of Directors.

I'd be really interested to hear if anyone has any first hand experience or views. Look forward to some healthy debate on this issue!

If you would like more information about ERM then speak with Andrew Tait (ATait@corerisksltd.com or (484) 581-2824). Andrew is a Principal of Core Risks Limited, a Jardine Lloyd Thompson Associated Company that is working with our independent US broking partners to enhance their client service offering. Core Risks have significant experience at developing and implementing ERM, both from the inside and as consultants.

5 tips to overcome insurer concerns on unproven technology for engineering construction projects

2009-08-19T10:35:13Z

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.

Response to blog enquiry... "I would be interested to hear your Casualty capabilities with regard to residential homebuilders in the US, both custom and tract. What is your min attachment point and limits. Thank you..."

2009-08-19T10:10:02Z

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.

London market gears up for US Builders' Risk growth

2009-08-13T11:09:15Z

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:

are you fully aware of the opportunities this creates?
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:

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

Maximising the infrastructure construction growth opportunity

2009-07-15T17:01:58Z

I was recently asked a question "how does the London market differ in its approach to the insurance of infrastructure/P3 projects?" The questioner had heard all about the London market's flexibility but wanted some real life examples. This got me thinking, perhaps he's not alone and we London market brokers focus on the big picture (flexibility, experience, knowledge) when we need to make it real. Well here are some of the recent examples I used to answer the question and which I hope will help you:

Railway bridge widening - cat exposed State

Of course, we were able to significantly reduce the premium and improve cover but a couple of things stood out (couldn't be achieved with the existing US insurer):

First party property damage on the existing bridge asset as part of the construction placement and incorporated in a broad JLT 'All Risks' form.
Addressed the significant natural perils exposure in line with contractual requirements, which provided relief for certain defined events. This enabled us to secure much higher limits than were previously provided

Major P3 road project
Having direct involvement in over 50% of the 1000 PPP deals that have been closed in London provides us with unbeatable insight. We understood the complex contracting structure and revenue related exposures and were able to put together a seamless solution.

At the heart of this was the importance of addressing the existing asset coverage, in this case the existing road, by commissioning an engineer's valuation and including coverage for the operational asset within the Builders' Risk placement.

I think a big advantage JLT and the London market offer is our global experience and writing business in almost every country in the world. As a result we can draw on this to refine and improve areas of coverage. For example, on civil and infrastructure projects London Insurers understand and are able to provide broad cover for defects of material workmanship design plan or specification when required.

Have a difficult technical question - go on send it to me and test my knowledge! Either post it using the comment area below here or use my contact form on our main site.

Jeremy heads the International Civil Construction Builders' Risks team at JLT. His expertise is in the area of building and civil engineering construction projects, both employer and contractor controlled. He has been involved as the Account Manager on many multi billion dollar major tunnels and building structure projects in the USA. Find out more...