Zurich Insurance Academy: Construction

Overview

Commercial property insurance is a standard coverage for most businesses. It pays for losses sustained to property as a result of a covered peril. But property insurance alone does not address the loss of business income that results from property damage unless it has been expanded to provide such coverage. Over 50 percent of property losses result in business income losses. That’s why most businesses have a critical need for business interruption (BI) and contingent business interruption (CBI) coverage.

A critical part of designing an effective business income protection program is the calculation of business interruption values. The analysis of a company’s financial information is needed to calculate adequate BI and CBI values in the event of losses. Additionally, an understanding of how BI and CBI values are calculated, and how they align with the terms of the policy coverage, can help facilitate payment in the event of a claim, and the restoration of the business in as complete and rapid a manner as possible.  

This program provides the producer with a comprehensive understanding of the need for these coverages, how they are structured, how to calculate the amount of coverage needed, and the best practices involved in documenting the claim.

Outcomes

As a result of this training, you will: 

• Understand the importance of business income and contingent business income coverage.
• Analyze the difference between how financial statements are prepared, based on generally accepted accounting principles (GAAP) and insurance accounting used to calculate BI and CBI losses.
• Understand how the BI worksheet is calculated for different types of business (manufacturing, retail and service).
• Learn best practices for documenting a BI or CBI claim.

Course duration 

3 hours 

Continuing education credit 

3 credits 

Relevant industries 

All industries 

Overview

Builders risk insurance indemnifies a building owner for damage to buildings while they are under construction; for loss of materials used in the course of construction; and/or delays in completion for real property during the course of construction. Builders risk is stand-alone, first-party coverage.

During this phase, multiple exposures exist, including those related to fire damage, windstorm, theft and vandalism. Coverage typically covers the construction phase only, and terminates when the work is completed and the property is ready for use and/or occupancy. 

Many producers are confused about when to use an inland marine builders risk policy versus a commercial property builders risk coverage form, especially for large or complex construction projects. Here we will compare and analyze the differences when, where and under what circumstances each coverage might best apply. This course also covers when and how to integrate installation floaters and rigging insurance into a comprehensive builders risk insurance and management program. 

Outcomes

As a result of this training, you will: 

• Understand coverage grants and exclusions in the Builders Risk form; 
• Analyze “soft cost”/optional coverages available, when and how they might apply.
• Identify best practices in designing and implementing a builders risk insurance program to ensure coverage adequacy, suitable limits and to prevent coverage gaps.
• Identify the leading causes of builders risk losses.
• Understand how and when installation floaters may be appropriate in a construction project.
• Understand the similarities and differences between inland marine and commercial property builders risk coverage forms.

Course duration 

3 hours 

Continuing education credit 

3 credits 

Relevant industries 

Construction, real estate

Overview

Construction projects are increasingly complex, and frequently require work in volatile weather conditions. Traditional Builders Risk insurance protects property against damage from wind, fire, theft and vandalism that may occur during the course of construction. Yet many Builders Risk policies are not properly structured, leaving significant coverage gaps.

At the same time, Builders Risk insurance requires that actual damage, theft or vandalism must have occurred to the property and/or construction equipment in order for coverage to apply. Yet construction projects can be severely impacted by weather events that don’t necessarily cause damage but yet result in significant work slowdowns or stoppages. For example, in 2020, there were 22 weather and climate disaster events with losses exceeding $1 billion each in the United States, shattering the previous annual record of 16 events that occurred in 2011 and 2017. These events included seven tropical cyclone events, 13 severe storm events, one drought and one wildfire event. The total cost of U.S. disasters from 2016 to 2020 was over $600 billion (source: National Oceanic and Atmospheric Administration, 2021).

This course addresses both issues, examining common coverage gaps in the design of a Builders Risk insurance policy as well as how extreme weather can be cost-effectively addressed with parametric insurance. A well-designed Builders Risk and parametric insurance program can help owners, developers, contractors and other builders complete projects on time and on budget. All distributors with construction accounts will benefit from this training.

Outcomes

As a result of this program, the producer will:

• Identify typical Builders Risk coverage gaps.
• Learn why Builders Risk policies often fail to transition smoothly to fixed property insurance coverage at project completion.
• Understand why LEG 3 endorsements can broaden coverage in the event of faulty design, materials and/or workmanship during the course of construction.
• Identify additional Builders Risk coverages or endorsements that are frequently overlooked.
• Understand why parametric insurance is a critical complementary coverage to Builders Risk insurance.

Course duration
3 hours

Continuing education credit
3 credits

Relevant industries
Construction, real estate

Overview

Construction has always been a challenging industry for risk management and insurance professionals. This reality is not expected to change. In this program, we will focus on three issues currently confronting the construction industry and the role of insurance within a comprehensive risk management program to address these challenges. They include:

New building materials: The construction industry is constantly developing and introducing new materials and products that can help speed up the construction process while lowering costs. Cross-laminated timber (CLT), a wood-based product, is one of these. These materials may present new and unanticipated risks.

Water damage mitigation: Damage caused by water has always been and is expected to continue to be one of the biggest sources of loss for insurers. And those losses do not result exclusively from flooding. Significant water damage can also be caused by burst pipes and leaks, rain, overflows and backups.

Construction professional liability: Those involved in the design and implementation of construction projects face professional liability exposures associated with alleged or actual negligent acts, errors and omissions in the rendering or failure to render professional services, including architects, engineers, land surveyors, construction managers, LEED-certified professionals, interior designer/space planners and other related professionals.

In this program, we will review risk management and insurance strategies that can address exposures related to the new and evolving use of materials used in construction, to managing water losses and to addressing construction-related professional liability exposures.

Outcomes

As a result of this training you will:

• Understand the exposures and underwriting challenges posed by new building materials, including aluminum composite panels and cross-laminated timber.
• Understand the scope and extent of water damage claims, based on a review of loss experience in the property and builders risk insurance lines.
• Understand how water-mitigation risk management strategies can favorably influence the insurance underwriting process.
• Identify construction-related professional liability exposures.

Course duration

3 hours

Continuing education credit

3 credits

Relevant industries

Construction, real estate, property owners and developers

Overview

Extreme weather events causing severe windstorms and flooding are increasing. These events can slow down or disrupt major construction projects. But a severe weather event may not trigger traditional insurance coverage (like builders risk insurance), which requires physical damage for benefits to be triggered. Even in the absence of physical damage, severe weather events can prevent work from being done, supplies from being delivered, and/or access to power sources.

Parametric insurance can be a solution. This insurance is triggered by a weather event that can be objectively measured by an official or recognized third party. For example, 80% of the total limit might be triggered by a Category 3 hurricane within a 30-mile radius of an insured location, or water rising past a certain level above “mean sea level.” Whether the metric (wind speed or water rise) has been met is then based on records maintained by a recognized, trusted third-party specified in the contract, for example, the National Oceanic and Atmospheric Administration (NOAA).  Any natural catastrophe might be incorporated into a parametric insurance policy. So while wind speed and water rise are typical triggering events, other natural events can also be included, including extreme heat, extreme cold, and earthquakes. Events may occur individually or in combination. Parametric insurance does not require physical damage to provide a claim payment for financial loss.

A major benefit of parametric insurance is faster payouts than traditional insurance policies. Once an event has occurred that satisfies the metric, the payout process can proceed quickly. Quick payouts can be critical in providing needed liquidity and cash for construction projects that are usually on tight schedules and thin profit margins.

Outcome

This program provides a solid foundation in the mechanics of parametric insurance.

Course duration

1 hour

Continuing education credit

1 credit

Relevant industries

Construction, real estate

Overview

Major hurricanes, tornadoes, earthquakes and other natural catastrophes are increasing in frequency and severity, posing increasing risks to health, safety and property. This has sparked growing interest in the design, development and construction of resilient buildings and communities. This program analyzes the elements of resilient and sustainable building strategies, implications for communities and the role of risk management and insurance in the process.

According to the Resilient Design Institute, resilient design is the “intentional design of buildings, landscapes, communities and regions in order to respond to natural and manmade disasters and disturbances.” Local conditions play a vast and critical role in this. For example, building resilience in New York City needs to accommodate hurricanes, flooding and blizzards, as well as dramatic temperature changes from winter to summer. Los Angeles, on the other hand, must contemplate seismic considerations as well as potential hazards from resulting gas line breaks and fires. In the East and Southeast, 30 million households are in the path of windstorms that can exceed 100 mph.

The insurance industry needs to be a key stakeholder in the development of resilient construction, building and community-resilience strategies. This program explains the various ways in which insurers and insurance professionals can participate in this process.

Outcomes

As a result of this program you will:

• Understand the principles of resilient and sustainable construction and building practices.
• Identify the characteristics that resilient communities exhibit that enable them to effectively plan for, endure and recover quickly from a disaster.
• Review major construction-related insurance claims that occurred over the past three years, and how “root cause analysis” findings can prevent or mitigate these losses going forward.
• Identify how construction-related insurance coverages have evolved to respond to resiliency and sustainability objectives and the implications for the underwriting and cost of these coverages.

Course duration

3 hours

Continuing education credit

3 credits

Relevant industries

Construction, real estate, property owners and developers

Overview

Many industries are subject to cyclical conditions, which can favor the industry in “up” markets and penalize it in “down” markets.

The property-casualty industry is similar, and its ups and downs are referred to as soft and hard market conditions, respectively. This course explains how insurance market cycles work, and the characteristics of each. We explain how distributors can help businesses best manage the hard market and employ tools that may enable the insured to secure coverage on more favorable terms and conditions.

Outcomes

As a result of this training you will:

• Understand the impact and influence of general economic trends and developments on conditions in the insurance market.
• Identify characteristics of, and factors that cause, a soft or hard market.
• Learn strategies distributors can use to help their customers and their own agencies survive and prosper even in the most difficult hard market conditions.

Course duration

2 hours

Continuing education credit

2 credits

Relevant industries

All