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Hard market complicates building coverage extensions



SAN DIEGO – Delays in construction projects are increasing, and the tough market is complicating the process of securing coverage extensions for risks.

"It's harder for contractors to extend the terms of their insurance coverage," said a panel of experts on Tuesday. 19659002] The causes of project delays vary, says Jaap Vrolijk, Risk Manager at Reston, Virginia-based contractor Bechtel National Inc. Delays when owners obtain permits can delay projects for several years, and disaster losses can also lead to long delays, he said during a session of IRMI Construction Risk Conference in San Diego.

In addition, construction projects are once again becoming more complex, making them more prone to delays, says Thomas Grandmaison, Boston-based real estate manager, construction, at Aon PLC.

Insurance problems have been exacerbated by an increase in the number of insurance companies withdrawing or leaving market, especially construction risk insurers in London, he said.

And insurance companies that remain in the market often look to raise prices for extensions of coverage, increase retention or impose conditions that were not included in the original coverage, said panel members. [1

9659002] With social inflation – the term used to describe increases in court decisions and settlements – insurance companies want to increase coverage costs for an extension to reflect higher losses, says John Roe, New York-based head of accident construction, North America, for Berkshire Hathaway Specialty Insurance Co.

"An extension allows us to potentially take action "The loss trend," he said.

Insurance companies are usually willing to work with policyholders, said Mr. Grandmaison.

"When there is a problem that will not go away any time soon, there is generally a way to find a solution," he said. to complete coverage extensions, said Mr. Grandmaison.

But there are limits to how much buyers can trust in relationships with insurance companies, said Mr. Vrolijk.

"The relationship does not help at all when a Carrier no longer does that business," he said. "Even if you have relationships with a carrier in other industries, it does not seem to matter."

To reduce the risk To have an insurer on a program that withdraws from the market before a project is completed, buyers should work with insurance companies that have an uninterrupted history of writing construction business, says Ted Wickenhauser, senior vice president of risk management at St. Louis-based entrepreneur McCarthy Holdings Inc.

"We are looking for those who are in business, have stayed in the industry and not been in and out and have a consistent appetite for the construction industry," he said.

Where insurance companies refuse to grant extensions, buyers can return to insurance companies that offered more capacity than was used under the original policy and see if they are willing to still provide some of the extra capacity, said Mr. Cheerful. "You can say, 'You promised us $ 20 million, we only spent $ 10 million, you can at least give us $ 5 more,'" he said.

In other cases, entrepreneurs can use their captivity. to cover uninsured risks, but project owners rarely pay that cost increase for contractors, he said.
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