When underwriting contractor-controlled insurance programs (CCIPs) as opposed to owner-controlled insurance programs (OCIPs), do insurers favor one type over the other? They do indeed.
"We generally prefer CCIPs to OCIPS," says Jack Probolus, marketing director for wrap-ups at Liberty Mutual.
Under a CCIP, the general contractor, rather than the project owner, assumes responsibility for arranging insurance that will cover the general contractor and most, if not all, subcontractors hired to work on the project.
Insurers prefer CCIPs over the owner option for a few reasons, market executives say, noting that general contractors:
- Tend to have established safety programs.
- Typically can exert more control over the safety program than can owners.
- Often work with the same subcontractors, who are familiar with the program.
- Have a significant monetary incentive to run a safe site that produces high-quality work, as insurers typically demand deductibles of at least $250,000 for full wrap-up coverage.
Most project owners, too, says Probolus, usually want general contractors to control the wrap-up insurance program because OCIPs can tap owners' credit lines: Wrap-up policyholders must provide a letter of credit as security for their share of project losses.
The exception is the atypical project owner that has an ongoing new-construction program run by a dedicated department experienced in managing OCIPs.
"Some owners operate like contractors," and insurers are just as interested in writing OCIPs for them, says broker Michael Hastings, Atlanta-based national project-risk practice leader in the U.S. construction practice for Marsh Inc.
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