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What’s in your Builder’s Risk policy?
If anything sums up the old adage about something being “greater than the sum of its parts,” it would be a construction project. Before we discuss the advantages of a reporting policy, however, it’s important to understand what a builder’s risk policy insures.

During the course of construction (where the value of the project increases day after day), a builder’s risk policy covers damage to buildings, structures and other property that is a permanent part of same. The extent of coverage, however, can vary depending on the carrier. AXA XL’s Inland Marine team offers a builder’s risk policy that can insure:

  • Private and public works
  • Commercial, industrial and residential occupancies
  • New construction
  • Renovation, alteration or addition to existing buildings

Additionally, equipment breakdown, flood, earthquake and volcanic eruption are available when required. Finally, soft cost coverage can be crafted to address additional expenses such as:

  • Interest on money borrowed to finance the project
  • Realty taxes and ground rent
  • Additional advertising and promotional expenses necessarily incurred
  • Cost of additional commissions incurred upon renegotiating leases
  • Fees for additional architects, engineers and consultants
  • Continuing project administration expense
  • Continuing legal and accounting fees

For contractors with multiple projects [using similar materials], a Master Builders Risk reporting form can offer significant advantages over single policies.

Reporting for Duty
Many contractors buy standalone policies to cover individual projects. Furthermore, these policies might be insured by different carriers. The insured and broker’s objective is to obtain the best terms, price, and service for that particular job. This seems straight forward enough, but it may not always be the best choice.

For contractors with multiple projects — built using the same construction material for similar occupancies (for example reinforced concrete, glass and steel office buildings) — a Master Builders Risk reporting form can offer significant advantages over single policies.

  • Flexible. With a reporting form policy, the contractor adds and removes projects as they begin and end, respectively.
  • Immediate Coverage. Projects added within the terms of the policy are covered right away; no need to chase after the broker to get a quote or issue a certificate of insurance.
  • Locked in Rates. As the contractor add a project to the policy, they can do so knowing the insurance costs up front, which helps manage budgets and offer bids.
  • Accounting Transparency. Because monthly premium charges are known up front, it is easier for owners, investors and other parties to understand the cash position of the project.
  • Ease of Doing Business. Coverage, risk engineering or claim issues can be handled more easily with a single point of service.
    Better Cash Management. Because the contractor only pays for active projects, cash flow is improved.

Other Things to Consider
We’re not calling these disadvantages for a reason. They’re simply points a contractor should look at closely when deciding to buy a reporting policy.

  • Deposits. Typically, a refundable escrow deposit is required at policy inception.
  • Risk Exposures. We find that contractors with fairly homogeneous exposures are best suited for using a reporting form policy.
  • Familiarity. Reporting policies take getting used to, particularly with the deadline-oriented record keeping required.
  • Deadlines. Contractors must report new starts by a specific day each month, with correct information provided for each start. Premium payment must also be issued on time to ensure there are no lapses in coverage. 

The bottom line is a reporting form policy can save time and money for the right kind of contractor and construction project.

About the Authors: Alexander McGinley is the Head of Underwriting Operations, Product and Strategy for AXA XL’s North America Marine team. Mike Perrotti is the Inland Marine Practice Leader for AXA XL’s North America Marine team. AXA XL’s inland marine underwriting and claims teams can work with you and your broker to determine if it’s the right policy arrangement for your project portfolio.

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Global Asset Protection Services, LLC, and its affiliates (“AXA XL Risk Consulting”) provides risk assessment reports and other loss prevention services, as requested. In this respect, our property loss prevention publications, services, and surveys do not address life safety or third party liability issues. This document shall not be construed as indicating the existence or availability under any policy of coverage for any particular type of loss or damage. The provision of any service does not imply that every possible hazard has been identified at a facility or that no other hazards exist. AXA XL Risk Consulting does not assume, and shall have no liability for the control, correction, continuation or modification of any existing conditions or operations. We specifically disclaim any warranty or representation that compliance with any advice or recommendation in any document or other communication will make a facility or operation safe or healthful, or put it in compliance with any standard, code, law, rule or regulation. Save where expressly agreed in writing, AXA XL Risk Consulting and its related and affiliated companies disclaim all liability for loss or damage suffered by any party arising out of or in connection with our services, including indirect or consequential loss or damage, howsoever arising. Any party who chooses to rely in any way on the contents of this document does so at their own risk.

US- and Canada-Issued Insurance Policies

In the US, the AXA XL insurance companies are: AXA Insurance Company, Catlin Insurance Company, Inc., Greenwich Insurance Company, Indian Harbor Insurance Company, XL Insurance America, Inc., XL Specialty Insurance Company and T.H.E. Insurance Company. In Canada, coverages are underwritten by XL Specialty Insurance Company - Canadian Branch and AXA Insurance Company - Canadian branch. Coverages may also be underwritten by Lloyd’s Syndicate #2003. Coverages underwritten by Lloyd’s Syndicate #2003 are placed on behalf of the member of Syndicate #2003 by Catlin Canada Inc. Lloyd’s ratings are independent of AXA XL.
US domiciled insurance policies can be written by the following AXA XL surplus lines insurers: XL Catlin Insurance Company UK Limited, Syndicates managed by Catlin Underwriting Agencies Limited and Indian Harbor Insurance Company. Enquires from US residents should be directed to a local insurance agent or broker permitted to write business in the relevant state.