Presenting your construction company to insurers: Beyond the proposal form

The author of this article, Nicola Wilson, specializes in the provision of Professional Indemnity Insurance to the construction sector in the UK and internationally. She works primarily on the client-side on large construction accounts.

As someone returning to the broking side of the insurance industry from underwriting, I have gained valuable insights into what insurers look for when considering construction risks. While a well-structured proposal form is important, it may not fully reflect the professionalism and capabilities of your firm. In this article, I will provide an inside look at how you can present your company to professional indemnity (PII) insurers, ensuring that the market's appetite for your risk aligns with your expertise and practices.

Building a strong presentation

When dealing with large construction risks, especially in industries like geotech, mining, and petrochemicals, it can be beneficial to set up a one-to-one meeting with London market insurers. This provides an opportunity to showcase your business in the best possible light and allows insurers to ask specific questions to aid their underwriting process.

Key information for insurers

While a proposal form covers essential details, a presentation enables you to expand on important aspects. Here are some elements insurers seek when assessing construction risks:

Overall business activities

Provide a comprehensive breakdown of your business activities, including detailed explanations of categories that encompass various services such as engineering consulting. This will help insurers understand the full scope of your operations.

Sectors you work in

Insurers are interested in knowing the sectors in which you operate. Higher-risk areas such as petrochemicals, aerospace, and energy require additional information regarding the activities performed, your responsibilities, and any liability limitations or exclusions, particularly for consequential losses like loss of profit.

Types and sizes of contracts

Insurers want to learn about your largest contracts, including the contract type, your specific activities, and the total contract value. Remember, the total contract value refers to the entire construction value of the project, not just your portion of it.

Sub-contractor vetting

Insolvency or errors of sub-contractors often lead to claims. Insurers will inquire about your vetting procedures for sub-contractors, including checks on their financial stability. They will also expect you to confirm that sub-contractors carry their own professional indemnity insurance (PII) and that you maintain a copy of their PII documentation.

Risk management

Demonstrate your commitment to robust risk management processes. Insurers find comfort in knowing that you have back-to-back contracts with sub-contractors, that non-standard contracts are reviewed by legal professionals, and that you have established sign-off procedures. Highlight your ability to limit liability under contract terms.

Fire safety/cladding

Since the Grenfell tragedy, insurers have become increasingly cautious about fire safety and cladding issues. While some relaxation has occurred, insurers still require full details of your exposure to determine the appropriate fire safety/cladding cover.

Additional Challenges Insurers Are Focused On Insurers are now paying attention to two important factors:

ESG (Environmental, Social, and Governance) Credentials: In 2023, environmental and green credentials have gained significant importance, particularly for oil and gas risks. Investors, shareholders, and supply chains are increasingly interested in how the construction industry is reducing carbon footprints and operating sustainably. Insurers also evaluate how construction companies manage and monitor ESG policies within their subcontracting chains.
Inflation and Contract Management: Rising inflation has affected the construction industry, with materials costs, especially timber and steel, skyrocketing. Insurers now inquire about how insureds manage inflation-related challenges under contract. Including provisions for cost fluctuations and potential contractor liquidations in contracts is essential to minimize delays, higher costs, and project interruptions.

In Summary

While insureds have a unique understanding of their businesses, presenting their expertise effectively to insurers is crucial. A poorly executed or misaligned presentation can result in a carrier declining to provide a quote, even if they were initially interested. By expanding on the information requested in a proposal form and addressing additional concerns such as ESG policies and contract management, construction companies can enhance their chances of securing comprehensive professional indemnity insurance coverage.

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For specialized help discovering smarter ways to navigate risk in the Professional Indemnity Insurance industry, get in touch.

Author

Nicola Wilson

Associate Director

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Contact

Andrew Bowyer

Director of FINEX Construction PI

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