Change Leader Interview: Insurance and Risk Management Is Crucial for Construction
Andrew Sims is senior vice president, Head of Property and Construction, at Generali Global Corporate & Commercial U.S.A. (GC&C), with more than two decades of experience executing underwriting strategies and processes across U.S. and international underwriting platforms as well as within middle, corporate and national account market segments. Prior to GC&C U.S.A., he served as senior practice leader, Head of Property, at the Risk Management Division of QBE The Americas.
Greg Mason is vice president of construction for Generali Global Corporate & Commercial U.S.A., with 26 years of experience in the construction insurance industry. Prior to that, he served as executive underwriter at Allianz Global Corporate & Specialty. He graduated Magna Cum Laude from the New York Institute of Technology with a Bachelor of Science degree and is a veteran of the New York Army National Guard.
V1: Could you briefly describe what you do at GC&C and how that relates to the construction, infrastructure and civil engineering industries?
Simms: Generali, as a corporation, has been around for over 180 years, with a heavy concentration on Europe. Within Generali, there is an existing global construction practice, and in the United States we offer the newest “shop window,” if you will, into the Generali global construction practice capacity, expertise and loss-control services. That’s the best way to understand who we are and what we do.
V1: Can you describe what a global construction insurance practice is?
Simms: Within GC&C, we have nine hub-offices, all of which provide a variety of different construction insurance projects. Rather than each office operating in isolation, we have a practice leader and a vigorous construction community within which we share best practices, successes, underwriting approaches, underwriting tools, wording enhancements, etc., while we operate within our individual territories and following our customers overseas as and when appropriate. We are very much an integrated underwriting team.
V1: We recently did a survey in our magazine, and risk assessment was one of the top concerns of engineers and those within the construction industry. Why do you think this is such a growing concern for builders, developers and engineers?
Simms: The risk environment is constantly changing. Projects are getting larger and more complicated, and construction techniques are changing, all of which lead to some concern on the part of buyers who want to make sure they’ve got appropriate coverage as well as the underwriters who want to make sure they’ve analyzed and assessed the risk appropriately.
V1: I saw that you have a Builder’s Risk Solution. What is that, and how is it customizable?
Mason: We have a project-specific Builder’s Risk policy that includes features that are important to contractors such as delay and completion, coverage, and various limits of a contractor’s expense. Each policy and project is on it’s own basis, and they’re completely customizable.
Simms: I think, within certain best-practice parameters, it’s not a “one size fits all” solution, it is a collaborative exercise between the buyer, broker and underwriters in Generali to make sure the coverage arranged is most appropriate given the specific project details.
V1: What numbers are we talking about for the levels of exposure for builders and contractors?
Simms: Insurance is about risks; every insurance contract has insurance risk in it. If you’re asking for a size of the market, the contract value as construction starts this year and next year are in the range of $600-700 billion. It’s a very substantial market.
V1: Are there particular infrastructure projects or areas that are exposed to risk more than others–for example buildings vs. bridges or plants–or are they relatively equal?
Simms: The risk depends on the contract. Building a four-wall, mid-rise residential block is probably seen as less hazardous than building a complicated bridge or tunnel project, for example. Some projects are inherently more risky than others, and that’s always been the case, and it’s always likely to be the case.
Mason: The types of projects under the infrastructure umbrella that include upon completion a revenue feature–like toll roads, metro lines and airports–have an added risk of business interruption in the event of a claim during the construction phase. Those have an added risk that’s less prevalent in other types of projects.
V1: When you’re working with clients, do you also help them work on practices to lower their risk, or are you mainly concerned with advising them on how much insurance they need?
Mason: I think the inception of a policy is the easy part. The work begins after that, when we visit the site periodically with a risk engineer to assess the ongoing risk at crucial points in the project where there’s a particularly tricky part of construction, we would very much like to be there to offer our experience and insight, and to help minimize that particular phase.
V1: How much time do you spend with them to try and correct some of the processes they’re doing?
Mason: That varies by project, but it might require a visit quarterly, more or less, depending upon complexity.
Simms: I think you have to bear in mind that most of the projects we typically get involved in are larger. We’re dealing with very experienced contractors, and the construction phasing and plans are all established prior to the project starting, so the initial collaboration comes during the review phase. Then they start verification and addressing things when they come up.
V1: What are some of the most commonly misunderstood perceptions of commercial risk insurance in terms of knowing what it is and what developers need? What are some of the misunderstandings that people might currently have?
Simms: All of our business is done by our brokers, and the phase leading up to the actual point of sale is done in a tripod-type arrangement between the insurer, broker and buyer. It leads back to the very experienced operators, and they have a strong sense based either on the risk factor, or based on the contract requirements for the project they’re involved in, or what they want or need as a minimum to buy.
V1: How does what you’re doing differ from other clientele that you do insurance for vs. the construction industry? What are some key differences?
Simms: I think there are actually more similarities, not necessarily in terms of the product line. Here in the United States we have three main lines of business now. We have construction, we have property–U.S. and multi-national–and we have foreign casualty. All of those lines of business were a part of our initial ramp-up in the United States and are reflective of areas where we think beyond just pure price and product offerings. Whether that’s access to our global network of engineers or loss-control people, or whether that’s the ability to issue compliant policies in 140 countries around the world, or whether that’s just the deep institutional expertise, for example, in the construction segment. In that sense, construction is very much part of what we’re trying to offer to customers in the United States.