Insurance Program Results

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Demolition Risks: Capacity Constrained Amid Industry Recovery

Writing demolition contractors will remain a struggle for the foreseeable future. Additional insurance requirements are being required by project owners and general contractors are forcing demolition contractors to seek higher limits and additional coverages, such as pollution and/or environmental liability and workers’ compensation, regardless of each job’s demands. Limits are now being pushed as high as $25 million.

Although demolition safety continues to improve and claims frequency for the class is at its lowest ever, claims severity is on the rise due to higher reconstruction costs and legal fees. A potential shortage of skilled workers also has carriers on edge. The recession left a large group of construction professionals jobless, forcing them to move into new careers. Industry reports project a shortage of 1.5 million construction workers by the end of this year as the pace of new construction returns to prerecession levels.

Demands for more comprehensive coverage combined with rising claims costs and the inherently dangerous nature of demolition work will drive rates higher. This segment has maintained consistent pricing during the past few years, with rates typically increasing by single-digit percentages during the past year. However, carriers were forced to lower pricing during the recession when strapped-for-cash demolition contractors couldn’t afford much coverage. Initial rate increases will be aimed at returning pricing to adequate levels, but healthy competition will prevent carriers from making any drastic changes.

Crittenden expects increases up to 10 percent on renewal accounts. It will be difficult to find competitive pricing for new accounts that do not perfectly match carriers’ risk appetites. Constriction within this segment will also contribute to hardening. Both Zurich and CNA exited this segment a couple years ago and show no signs of a desire to re-enter it.

Several surplus lines carriers, including Starr Indemnity, Rockhill and Century, will take on interior demolition accounts but it is becoming increasingly more difficult to find coverage for larger, more complex demolition risks. Carriers like ACE Westchester might take on a demolition account for the right price if an agent happens to submit an account, but don’t expect ACE Westchester to pursue this class or even underwrite new submissions. AmWINS’ program backed by W.R. Berkley companies, including subsidiaries Great Divide and Nautilus, and the Apollo General Insurance Agency program backed by Fireman’s Fund (in the process of taking on the branding of parent company Allianz) continue to dominate the demolition contractors segment with coverages tailored specifically to this type of risk.

Apollo can place business that does not fit its programs with Allianz’s surplus lines carrier, Interstate Fire & Casualty. Blue River Underwriters also does a significant amount of demolition business through its AmTrust International Underwriters-backed Demolition Elite program.

Carriers are generally willing to provide general and pollution liability coverages for demolition contractors involved in the removal of asbestos, lead paint, silica and other harmful pollutants. Most brokers, however, are forced to seek monoline coverages from multiple carriers, including those with lower B ratings, to create a patchwork of policies to meet all of the needs of a single account. Most carriers won’t even look at a demolition contractor operating in New York City or those still using wrecking balls and/or explosives. New York City is avoided by most carriers writing demolition contractors because of work comp laws and because the probability of liability claims is about four times greater than in other cities.

Demand for demolition is increasing with the economic recovery and interior demolition for commercial building remodels is the most rapidly growing area of business. The demolition of vacant buildings is also growing to make way for new construction in cities experiencing an economic resurgence, such as Dallas and San Francisco. In cities like Detroit, where the recession left many areas empty and blighted, local govern­ments are contracting for the demolition of vacant buildings to combat high crime and sinking property val­ues. Expect claims to increase as the amount of demolition in residential areas increases. It isn’t uncommon for demolition contractors to accidentally damage a neighboring property in high-density residential areas, such as where row houses are common. Nuisance claims are also increasing as residents unhappy with municipalities’ initiatives to remove blighted properties file complaints that are ultimately dismissed.

Crittenden expects Berkley and Allianz to slightly expand their risk appetites as the construction industry begins to generate more business. AmWINS will try to keep rates as stable as possible for the demolition contractor accounts it underwrites and will try to write any demolition contractor with good loss history and thorough safety procedures. The program underwriter has been working with Berkley for the past two years since former carrier partner CNA exited the demolition contractors segment in 2013, when construction business was still in the doldrums. The AmWINS demolition contractors program offers limits up to $10 million. AmWINS looks at safety procedures, safety manuals, and Department of Transportation and OSHA results when considering a new account. Berkley conducts inspections and safety consultations for large accounts.

Apollo General offers two demolition contractors programs and expanded those programs in recent years to offer coverage specific to concrete cutters and commercial recycling of construction debris. While concrete cutting is included in a demolition contractors program, some demolition services subcontract out concrete cutting if a specific cut is needed. The broker/program underwriter writes large and small demolition risks on Allianz paper with general liability limits of $1 million/$2 million, products and completed operations limits of $2 million, commercial auto limits of $1 million, and for large projects, a $5 million aggregate. Apollo General has worked with this class for more than 40 years and doesn’t limit the type of contractor it will work with, but it takes a close look at each individual contractor’s safety program and loss history.

Blue River Underwriters looks to expand its property and inland marine offerings by covering the equipment used by demolition contractors. The program underwriter can offer property coverages to some demolition contractors, depending on the state in which they operate, but is looking to partner with a carrier that will be able to offer more competitive pricing for property coverages and that understands pricing for exposures like hail and wind. Blue River Underwriters’ Demolition Elite program, backed by AmTrust, currently provides general liability and excess liability coverage nationwide and can offer additional coverages, including auto, crime and property, on a risk-by-risk basis. Blue River Underwriters previously wrote Demolition Elite policies on Zurich paper. The program underwriter is slowly growing its book of demolition contractors as the amount of construction increases nationwide. It plans to keep rates flat for these accounts, with policy premiums starting at $5,000.

Copyright © Crittenden Research Inc., September 7th, 2015

Contractors Pollution Liability

Administered By: Rockhill Insurance Group

Distribution: Carrier Direct

Industries:

Artisan & Trade Contractors, Contractors, Demolition Risks, Environmental Consultants

Carriers: Rockhill Insurance Co., State Auto Insurance Cos.

Coverage: Environmental/Pollution Liability, Property Damage

Limits: up to $10 million (Excess), up to $11 million (Pollution Liability), up to $6 million (General Liability)

Demolition Elite

Administered By: Blue River Underwriters

Distribution: Program Administrator

Industries:

Artisan & Trade Contractors, Builders Risk/Home Builders, Contractors, Demolition Risks

Carriers: AmTrust Group

Coverage: Commercial Auto, Crime, Excess, General Liability, Inland Marine, Property, Umbrella/Excess

Limits: up to $5 million (Excess), up to $1 million/$2 million (General Liability)

Concrete Sawing & Drilling Contractors Program

Administered By: Apollo General Insurance Agency

Distribution: Direct/Broker

Industries:

Artisan & Trade Contractors, Construction Equipment/Machinery/Materials, Contractors, Demolition Risks

Carriers: Firemans Fund Insurance Co.

Coverage: Commercial Auto, Contractors Pollution , Excess, General Liability, Inland Marine, Property, Umbrella/Excess

Limits: up to $1 million/ $2 million (General Liability), up to $2 million (Products & Completed Operations), up to $1 million (Personal/Advertising Injury), up to $100,000 (Fire Legal Liability), up to $5,000 (Medical Payments), up to $1 million (Employee Benefits Liability), up to $1 million (Auto - Combined Single)

Demolition Contractors Insurance Program 1

Administered By: Apollo General Insurance Agency

Distribution: Direct/Broker

Industries:

Artisan & Trade Contractors, Contractors, Demolition Risks

Carriers: Allianz, Firemans Fund Insurance Co.

Coverage: Commercial Auto, General Liability, Products & Complete Operations Liability, Professional Liability

Limits: up to $100,000 (Damage to Rented Premises), up to $1 million (Professional Liability), up to $5 million (Per Job Aggregate ), up to $1 million (Auto), up to $2 million (Products & Completed Operations), up to $1 million/$2 million (General Liability)

Demolition Contractors Insurance Program 2

Administered By: Apollo General Insurance Agency

Distribution: Direct/Broker

Industries:

Artisan & Trade Contractors, Contractors, Demolition Risks

Carriers: Allianz, Firemans Fund Insurance Co.

Coverage: Commercial Auto, General Liability, Products & Complete Operations Liability, Professional Liability

Limits: up to $2 million (Products & Completed Operations), up to $1 million (Auto), up to $1 million (Professional Liability), up to $1 million/$2 million (General Liability), up to $100,000 (Damage to Rented Premises)

Environmental

Administered By: James River Insurance Co.

Distribution: MGA

Industries:

Chemical Manufacturers/Distributors, Contractors, Demolition Risks, Environmental Consultants , Manufacturers/Manufacturing Risks, Project Managers, Project Managers/Project Management, Schools, Site Pollution, Warehouses, Waste/Recycling Services

Carriers: James River Insurance Co.

Coverage: Contractors Pollution , Environmental/Pollution Liability, Excess, General Liability, Pollution Legal Liability, Professional Liability

Limits: up to - $5 million (Primary), up to - $11 million (Lead Excess Or As Part of Higher Excess Layer), up to - $11 million (in combination with Excess)

 

DemoPro

Administered By: AmWINS

Distribution: MGA

Industries:

Artisan & Trade Contractors, Contractors, Demolition Risks

Carriers: W.R. Berkley Corp.

Coverage: Commercial Auto, Excess, General Liability, Pollution Legal Liability

Limits: up to $1 million/$4 million (General Liability), up to $10 million (Program Aggregate), up to $1 million (Auto)

Excess Construction

Administered By: STARR Cos.

Distribution: Direct/Broker

Industries:

Artisan & Trade Contractors, Contractors, Demolition Risks

Carriers: Starr Indemnity & Liability Co.

Coverage: Excess

Limits: up to $25 million (Excess)

Primary Construction

Administered By: STARR Cos.

Distribution: Direct/Broker

Industries:

Artisan & Trade Contractors, Contractors, Demolition Risks

Carriers: Starr Indemnity & Liability Co.

Coverage: Commercial Auto, General Liability, Workers' Compensation

Limits: - - Please Inquire

Restoration Contractors

Administered By: Tokio Marine Specialty Ins. Co.

Distribution: Carrier Direct

Industries:

Artisan & Trade Contractors, Contractors, Demolition Risks

Carriers: Philadelphia Indemnity Insurance Co., Tokio Marine Specialty Insurance Co.

Coverage: Auto Liability , Contractors Pollution , Crime, Excess, General Liability, Professional Liability, Property

Limits: up to - $1 million/$3 million (with $10,000 Excess)

Umbrella/Excess Liability

Administered By: Century Surety

Distribution: Carrier Direct

Industries:

Apartments, Artisan & Trade Contractors, Auctioneers, Auto Service and Repair, Beauty Salon/Barber Shop, Campgrounds/RV Parks, Demolition Risks, Equipment Dealers, Farm/Ranch/Agribusiness, Homeowners/Condo Associations, Hospitality (Hotels/Motels), Landscape Design/Landscaping/Lawn Service, Lessors Risk, Manufacturers/Manufacturing Risks, Mercantile, Real Estate Managers, Restaurants, Retail (Convenience Store), Schools (Vocational), Vacant Property , Warehouses

Carriers: Century , Meadowbrook Insurance Group Inc.

Coverage: Umbrella/Excess

Limits: up to $5 million (Umbrella/Follow Form Excess)