Construction firms forced to take risks and go for ‘home runs’

Challenging industry requires robust insurance support

Construction firms forced to take risks and go for ‘home runs’

Construction & Engineering

By Bethan Moorcraft

As the construction industry in Canada becomes more prone to legal disputes, the need for robust construction insurance policies and surety bonding is growing critical in tandem. Insurance and bonding both play vital roles in ensuring both public and private construction projects are completed on time and on budget – two things rarely achieved by construction firms today.

There are lots of issues that challenge the construction industry and contribute to project delays and over-expenditure. Like many sectors, the industry faces an impending wave of baby boomer retirements and a potential workforce shortage or gap as a result. It’s also contending with NAFTA tariff uncertainties, insecure revenue streams (building and repairing infrastructure isn’t cheap), and, of course, construction firms are up against the Canadian weather. At the height of a harsh Canadian winter, infrastructure wears out quickly and can be costly to repair and maintain.

Other current construction trends include a tendency to amalgamate design processes with construction, and a push from Canadian municipalities to bulk construction projects together – both of which require construction firms to take on more risk, according to Scott Gilmour, partner at the newly-formed, construction-focused insurance brokerage, APEX Surety & Insurance Ltd (APEX).

He told Insurance Business: “We’re seeing an increasing number of construction projects where some of the design is being passed along to the actual contractors. This is good in many ways because the contractors tend to be the experts in their fields – a roofer knows roofing better than everyone else and a plumber knows plumbing, etc. At the same time, adding that to your scope also means construction firms are having to take on some additional risk. If the design’s incorrect or faulty, they could suddenly find themselves facing significant liabilities.

“Beyond that, there’s been a push lately by municipalities to bulk construction projects together. Whereas projects used to be tendered one at a time, giving firms a chance to bid for projects in isolation, now a lot of projects are being tendered in packages. As construction projects grow in size, there’s more opportunity for delays and budgetary issues. Suddenly, instead of trying to hit a single, construction firms are having to hit a home run – and the complexity of that task makes it more risky.”

As the complexities in the construction industry grow, companies are turning to their insurance partners – brokers and carriers – for more tailored support. This is why Gilmour and four other partners decided to set up APEX, which they claim is Winnipeg’s first insurance brokerage with a specialized focus on surety and the construction industry. Together, the five partners offer a combined 60-years of experience in construction-specific insurance, with backgrounds in law, accounting, banking and construction management. 

“In the past decade, lots of construction risks have been placed through programs or bulk purchasing arrangements,” Gilmour commented. “At APEX, we want to provide a more bespoke, custom approach to each client, regardless of their size. When we looked at the brokerage landscape in Winnipeg and Western Canada, we felt there was room for an additional entrant that was more focused on construction and surety. The Prairie provinces have some of the fastest-growing economies in Canada and they’ve seen some significant infrastructure projects in recent years, including the Keeyask dam project in Northern Manitoba and the oil and gas pipeline projects in Alberta and Saskatchewan. It’s an excellent market for the construction industry and for construction insurance as a side.”  

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