USI's Northwest Construction and Real Estate Practices helping their clients offset difficult environment for local developers.

A potential recessionary environment, regional banking concerns, increasing interest rates, prospects of a federal debt-ceiling crisis, and persistent skilled labor shortages all hit the top of risk issues currently plaguing the construction industry and by extension, property development. What has emerged the most challenging condition, as it pertains to insuring these risks, is the property insurance market conditions and financial impact on not only property portfolios, but project risk as well.

 

One major bi-product of the market conditions is lack of available capacity and appetite in the CAT exposed and frame Builder’s Risk Marketplace. More and more, project owners and general contractors struggle to find Builder’s Risk carriers interested in writing large value projects and when they do, the price doesn’t pencil with the budget and capacity constraints making trying to fill large builders risk coverage towers a challenge. Pricing is outpacing any expectations, brought on by a record number of financially catastrophic weather events as well as significant losses on wood frame construction projects.

  

Leveraging their size and buying power in the marketplace as well as in-house pre-underwriting, USI is answering this need for PNW developers. Their approach is a viable and proven alternative to what is available in the marketplace, and it has been at the heart of their Construction and Development Practice for many years. Some of the challenges that we created alternative solutions include but not limited to the following: no water-infiltration exclusion, LEG3 wording, inflation clauses, and automatic policy extensions written into the policy at inception.

 

Dorothy Reed, VP in the Construction and Development Practice at USI shared this recent case study: A multi-family developer in our area was in the final stages of pre-construction on a seven-story podium multi-family project, roughly $35,000,000 in TIV. They had a quote in hand from the domestic market with no coverage for Earthquake/Earth Movement or Flood. We were given the opportunity to take this project to market and put together a comparison of price and coverage. We returned a quote for a full program that was roughly 25% less than the open market quote, which included a $10m sublimit for Earth Movement and Full Flood limits, saving the client around 25% plus the significant additional cost of Earthquake/Earth Movement coverage required by the lender.

 

Wood frame construction is where our approach truly shines, and where most of the placement and cost constraints are currently found, but our approach is also a viable market for joisted masonry and non-combustible in higher value ranges. In addition to property coverage for course of construction (Builder’s Risk), USI works with clients to develop various General Liability, Pollution, Professional Liability, and Subcontractor Default (where applicable) programs for projects. Outside of project risk, they develop cost efficient strategies for post-construction property placement as well as permanent programs for Project Owners, General Contractors, and companies throughout the entire construction and development ecosystem. 

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