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Survey Report

Construction Marketplace Realities 2019 – Controlled Insurance Programs

Insurance Consulting and Technology
N/A

March 29, 2019

The controlled insurance program (CIP) marketplace continues to produce competitive rates and broad coverage for both owners and contractors.

Rate predictions

  Trend Range
Primary: No change or slightly up Flat to -5%
Excess: Decrease -5% to -10%

Key takeaway

The controlled insurance program (CIP) marketplace continues to produce competitive rates and broad coverage for both owners and contractors.

The controlled insurance program (CIP) marketplace continues to produce competitive rates and broad coverage for both owners and contractors. Growth expectations in habitational, manufacturing and mixed use continue to pave the way for competitive pricing, as well as some recent industrial projects. Warehouses, office buildings and data centers are some of the types of projects that stand out in recent pipelines.

GL-only low retention CIP programs offer an alternative to the traditional WC/GL large deductible CIP programs that usually require clients to post and tie up collateral for several years. With regard to pricing, there remains capacity in the market, especially for non-residential. Rolling programs continue to be popular, and more creativity and flexibility have helped sell these types of programs. Some examples of flexibility are “pay as you go” (enroll) options and subscription programs. The volume in these types of programs helps attract more competitive rates.

Overall, carriers remain hungry for project business and often want to save their capacity in the contractor space for these programs to avoid anti-stacking issues when participating in both project and practice. Pricing in the excess liability CIP space continues to soften. Splitting up the lead $25M (10/15) continues to be common. As premium dollars decrease higher in the tower, quota shares can help provide more competitive options and avoid minimums.


New York update

CIPs remain a popular solution to reduce costs and ensure coverage certainty, but GL retention levels continue to rise. The standard markets which have historically been competitive have either pulled away or require increased retentions and large collateral outlays from the client. Their concerns are no longer just erosion of the “maximum program aggregate” but also paying out defense dollars on GL Labor Law claims that settle above the retention. The minimum GL retentions in NY have risen to the $2M – $3M deductible range.

Accompanied by premium increases for any risk transfer, carriers are essentially funding to limit. Therefore, many CIPs are now structured with a $5M per occurrence retention, which allows the client to fund the risk and realize potential savings via risk management.

The cost of entry to undertake a CIP has increased as carriers expect significant internal oversight from the sponsor. The focus is on the sponsor to put forth risk management, loss control and claims management services with appropriate staffing. While these requirements are enhanced from your broker partnerships and their experienced services and capabilities, there is a need to actively participate in overall program management.

The entrance of new GL markets has led to more stand-alone GL CIPs in New York, which can provide a lower overall cost for the program, including “pay as you go” collateral and reduced completed operations exposures. The standard markets continue to support a stand-alone CIP for the workers’ compensation component which can be paired with the GL CIP.

With GL retention levels on the rise, matching deductibles and fronted programs have become a standard on large construction projects in New York. The program sponsors now take on most, if not all the primary GL limit. Therefore, the use of captives is a popular discussion point to explore a more cost-effective way to structure a CIP given the minimal risk transfer options in the market.


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