XL Group Provides Secure Foundation for Construction Risks
What trends is XL seeing in the construction market?
We’re seeing several trends in the construction field, among the large contractors that we work with. For one, projects are getting bigger and bigger. There’s quite a bit of consolidation, as smaller contractors are absorbed into larger ones. And the nature of what’s being built is changing. There’s a need for a lot of infrastructure improvement – roads and bridges are aging and need replacement, for example – and a lot of those projects are starting to get funded. Another trend is in project procurement. The traditional design/bid/build process has fallen to the wayside. Now, it’s more common and more efficient for contractors to do design/build projects.
What size of projects are accounting for most of the activity in construction now? How has that changed?
What we’re seeing now is a lot more mega-projects, with values exceeding $1 billion. In fact, there are more and more construction projects today valued at up to $5 billion, which was unheard of 10 years ago. Mega-projects often require two or three large contractors to work together. These risks are more challenging than in the past, when smaller projects were the norm.
What are some of the major challenges that contractors are facing?
Finding the right people is a big challenge for contractors today. During the significant economic downturn a few years ago, contractors trimmed their workforces. As things start to turn around, and there are signs that the economy is turning around, contractors’ big fear is not having enough skilled labor and management talent to take on projects. Employers everywhere are looking for good people, but construction is a little different because experience and training are needed. The nature of the work is more hazardous than in many other industries. It’s important that contractors bring on the right people, with the right training, to avoid exposure to construction defect claims and injuries.
On projects themselves, some of the challenges include the length of time involved and the competitive environment. Some mega-projects can take five years to complete, so contractors have to get their insurance coverage right, so they can build that into their bids during the bidding process. That’s especially important for contractors now because there are a lot more people bidding on projects than there were five or 10 years ago.
What kinds of insurance solutions are contractors seeking now?
Professional liability solutions are in demand now and that’s an upward trend. Contractors didn’t buy this kind of protection 10 to 15 years ago. With more design/build projects, if you’re a bigger contractor, your organization needs to look at professional liability risk.
Subcontractor default insurance is another growth area, with more companies looking at SDI as an option they never considered before. XL’s innovative subcontractor default solutions, such as ConstructAssure, help contractors analyze and manage the many risks of working with subcontractors. That helps them to deliver higher-quality projects, with fewer quality issues that allow contractors to deliver projects on time and under budget. It’s truly a win for all involved.
What trends is XL seeing in surety for construction projects?
In 2013, the insurance industry saw an increase in gross written premiums for surety risks for the first time in five years. That has been driven by large projects. Overall results remain strong, with the surety loss ratio below 20%. That shows not only increasing demand for bonds but also that contractors and owners are valuing risk management approaches.
How does XL’s approach help construction firms?
Our focus on risk management and risk engineering is especially helpful to contractors. We help make them better contractors, more competitive in their space and help them become safer operators. Construction is a risky business. About three U.S. workers die every day in construction, and another 90,000 a year are injured on jobsites, according the U.S. Bureau of Labor Statistics. That’s one reason XL launched Risk Resource, a video library that’s part of an online toolkit on safety for construction firms. We believe our approach, the resources we offer and our structure allows XL to be more consistent, flexible and responsive to clients’ needs.
What makes XL a good partner for contractors?
Our business plan is simple. We find the best experts focused on contractors and we huddle together and work as a team to solve problems that contractors have. Other companies take a line-of-business approach, which makes it very difficult to get people to think about new issues and trends to create solutions for contractors. XL’s organizational structure allows us to take an account-level view, not just look at individual product lines. At XL, we’re very responsive, agile, innovative and consistent. Contractors that work with us don’t see large swings in their premiums. We try to get the right price for the right risk. Our people, from risk engineers to underwriters to claims professionals, show up and all of us are focused on building strong relationships with our contractor and owner clients.
As North America Construction Leader, Gary Kaplan leads a team focused on building long-term relationships with contractors, clearly understanding their changing business needs and providing them with products and services that help them protect their profitability,maintain a competitive edge and improve safety on the jobsite.