Your client’s construction incident is a painful way to learn
the carrier you recommended has less than stellar claims
service. Great American’s strength of specialization gives
us the rare ability to see risks, write coverage and handle
claims in a way that gives your clients greater satisfaction.
Don’t settle for less. Turn grim to great with Great American.
Visit us at GAIG.com.
Protecting hundreds of niche industries
with expert insurance solutions
When it’s grim, you need Great®
Great American Insurance Group, 301 E. Fourth St., Cincinnati, OH 45202. Policies are underwritten by Great American Insurance Company, Great American Assurance
Company, Great American Alliance Insurance Company and Great American Insurance Company of New York, authorized insurers in all 50 states and the DC. © 2018
sector. Subcontractors are already getting
a great deal of work and new tariffs
may raise the price of construction
materials, notably steel and aluminum.
“There is also the number and
scale of natural disasters, hurricanes,
mudslides and fires,” she added.
Delisio noted, “There is a whole
generation of experienced individuals
moving to or are already in retirement.
Here we are 10 years on from the
recession, and there is a bit of a gap now
that the business is revving back. The
10- to 20-year people are few and far
One possible response to the
burgeoning size of projects is to
subdivide them: “Sometimes an owner
will float a long-duration project and
there are only a limited number of
underwriters that can bond a billion-dollar project,” Fogle explained.
“But there are more who can bond
a series of four $250 million projects.
There are more contractors who
can handle that size project as well.
Contractors like to phase their work
Phasing a project gives owners more
capability to bring in more contractors
and more underwriters, he said.
Phases also extend bonding capacity,
but Fogle said that is not as much of a
concern. “We’ve got a huge Treasury
listing, and we can write billion-dollar
projects, but we like to diversify our
risk. We have some projects we write
on a sole basis, but most of our larger
accounts we write on a co-surety basis.”
He noted that “co-sureties are liable
joint and severally, so we have to be
careful. We underwrite our co-sureties
just as we underwrite our clients.”
Quinn concurred that co-surety is
a common solution for large projects.
He also noted “there are opportunities
for owners to accept something less
than 100 percent, down to as low as 50
percent. That means they are accepting
a lower bond amount.
“The reality is that there are 130
sureties in the U.S., but only about
eight that can participate in bonds of
the largest size. That does increase
costs [for the projects] some, but that is
not holding projects back.”
“We do have underwriting
capacity for large projects, especially
those performed in joint venture or
consortium,” said Brooks. “There
might be limits imposed for a given
contractor that has reached the top of
its aggregate capacity.”
ADAPTING TO SCALE
Quinn expressed confidence the
industry will get itself sorted in time.
“There are newer players, and as
project size has grown, the industry
needs to respond, even though there
may be fewer people participating at
the highest levels.”
The scale and scope of the business
may be changing, but the fundamentals
have not, he said. “It still comes down
to underwriting and individual risk.”
At the other end of the market,
there are no concerns for underwriting
or the capacity of contractors to handle
and complete projects.
“We play at the smaller-project level,
$100 million or less,” said David Layman,
vice president and chief underwriting
officer, Argo Surety. “There is plenty of
capacity for us and for our clients.”
Given the nature of the construction
business, that ample capacity on the
part of contractors for smaller projects
is not a resource that can easily be
aggregated for the larger projects
where there is a capability crunch.
“Our clients are general builders
themselves,” Layman explained. “They
are not going to sub-contract to other
[larger] general builders.” &
GREGORY DL Morris is an independent
business journalist based in New York. He
can be reached at; email@example.com.