This article was produced in partnership with Economical Insurance
Karen Surca of Insurance Business Canada sat down with Jim English, senior technical specialist at Economical insurance, and Steve Beeston, construction specialist with Economical in Western Canada, to talk about the six categories that Economical Insurance pays special attention to when mitigating mid-size commercial construction risk
Embarking on any commercial project involves many elements, and there are also many players that support the foundation of a commercial construction project.
From handpicking a good general contractor to sourcing materials and hiring reliable subtrades, many aspects must fall into place before construction can begin.
When it comes to mitigating the risks involved in any proposed commercial project, commercial construction underwriters must look at specific criteria and ensure that it is met for a builder to have in place the necessary insurance coverage.
According to Jim English (pictured above), senior technical specialist with Economical Insurance, there are specifically “six pieces of information that Economical Insurance looks out for when focusing on a new building project in the mid-size commercial market.”
English also points out that another crucial link to help facilitate the commercial underwriting process is maintaining a good working relationship with experienced construction brokers who understand the business and gaining useful background information from them to help fill out the overall risk picture.
At the top of the list, and an obvious piece of the underwriting puzzle, involves the completion of a comprehensive application form.
“By filling out an application form, details can be provided about the builder’s risk, including critical information such as protection, exposures, and construction materials,” English outlined.
Next, English specified that access to a good Geotech report that outlines variables like soil conditions represents a second key piece of information used by commercial underwriters.
The third category of information that will be assessed includes “site plans and drawings. An artistic rendering of the project is also very helpful,” English stated.
The construction schedule and a copy of the contract provide the fourth and fifth pieces of the information to help evaluate the exposures of the builder’s risk.
The final piece of the underwriting puzzle (but not the least important) is information on the general contractor. Their experience, track record, and financial strength are all important underwriting factors to consider.
Steve Beeston (pictured immediately above), technical specialist with Economical Insurance, drew attention to the special significance that underwriting the general contractor plays.
“The general contractor is going to be the one that is running the job. They are not always going to be doing work. Most of their scope is going to be project management, how they manage their trades,” Beeston explained.
“Having good subcontractor pre-qualification done and making sure they have done similar jobs in terms of size, duration, and scope, as well as understanding how the general contractor will deal with loss caused by the subcontractor during construction or even after construction,” Beeston added.
Although the information is pertinent to the commercial underwriting process, Beeston pointed out that understanding and knowing the people that will be completing the work is also at the core of the process.
“Applications, Geotech or consultant reports, site plans, contracts, and construction schedules are all paperwork at the end of the day. Getting to understand the people performing the work and the companies behind the companies that are doing the work. That is also important for us to be able to understand and underwrite a builder’s risk,” Beeston elaborated.
Forming a complete picture of a builder and a complete picture of the project at hand is the only way to ensure that any potential risk is properly covered.
Using the information at hand and studying all relevant material will enable a construction underwriter to have a holistic view of a proposed commercial project and an understanding of what is trying to be achieved.
English and Beeston both highlighted that another part of the underwriting picture includes any soft costs associated with the commercial project.
“Soft cost is an area of builders’ risk coverage that is easily misunderstood, and knowledgeable construction brokers will most likely have a good grasp in this area. Understanding what types of soft costs should be insured is a key step in the placement of builders’ risk coverage,” Beeston explained.
This is when the key component of working with seasoned construction broker partners becomes so vital to commercial underwriting.
“It is a meeting of the minds between the broker and insurance company as to what we know about the soft cost that is being covered in the builder’s risk policy,” Beeston stated.
“We have those necessary discussions and interactions with brokers to make sure everyone is understanding what is covered. It’s understanding how to quantify that risk, and a broker that is good knows how to do that and has the dialogue with their own customer and then passes that through to the insurance company,” English added.
For all the players, both on the risk mitigation side and those involved in a proposed commercial project, having all the game pieces in place is paramount. These key pieces include the necessary paperwork, a supportive construction broker, and a commercial underwriter to pull the information together enabling commercial construction to proceed without any risky cracks in the foundation.
Jim English is a senior technical specialist with Economical in Canada. He spent his career working for many years on the insurance, reinsurance, and brokerage side prior to joining Economical in February of 2021.
Steven Beeston is a construction specialist for Economical in Western Canada. He spent most of his career working on construction risk for one of the largest global firms prior to joining Economical in June of 2021.
