THE PAST, PRESENT, AND FUTURE OF DEFAULT INSURANCE

Transcription

1 WORKSHOP W2 Wednesday, November 9 8:45 a.m. 9:45 a.m. and 10:15 a.m. 11:15 a.m. THE PAST, PRESENT, AND FUTURE OF DEFAULT INSURANCE Presented by Brian Carpenter Executive Vice President Willis Towers Watson In a relatively short period of 20 years, default insurance has become a key component of many contractors risk management strategy. With an increasing frequency and severity of subcontractor default claims, along with a dynamic underwriting appetite for this coverage, many are questioning the future of default insurance. This session will contemplate the past, present, and future of a policy that is both attracting new capacity and challenging existing capacity at the same time. Looking at the past, we will discuss how the policy s original promises have fared in its first 20 years of existence. The present view will discuss the product s evolving underwriting appetite, capacity, and features. The future outlook will consider coverage and mind-set changes that may be necessary to assure a viable market for a product so relied upon by general contractors. This session will rely not only on the speaker s knowledge of the default insurance marketplace but also the audience s perspective and participation. Workshop W2 To print on both sides of the page, set your printer for duplex printing. Copyright 2016 International Risk Management Institute, Inc. 1

2 JUNE 5TH, 11:08 A.M. A STAGGERING STATISTIC INSPIRES A LIFE-SAVING RULE IN AN INSTANT, CALVIN BERGER SAW THE VALUE OF IN-CAB BEHAVIOR TRAINING FROM CNA When a recent safety webinar revealed that 280,000 drivers are involved in serious accidents every year, Calvin Berger of Calberg Contracting took CNA s recommendation to heart, and posted placards restricting cell phone use in each of his company s vehicles. Now Calberg Contracting is filing fewer claims, and Calvin s enjoying a handsome bonus for worker safety and performance. When you re looking for risk control programs that keep contractors dialed in to relevant industry trends we can show you more. To learn more about CNA s coverages and programs for building contractors, contact your independent agent or visit The examples provided in this material are for illustrative purposes only and any similarity to actual individuals, entities, places or situations is unintentional and purely coincidental. Please remember that only the relevant insurance policy can provide the actual terms, coverages, amounts, conditions and exclusions for an insured. All products and services may not be available in all states and may be subject to change without notice. CNA is a service mark registered by CNA Financial Corporation with the United States Patent and Trademark Office. Certain CNA Financial Corporation subsidiaries use the CNA service mark in connection with insurance underwriting and claims activities. Copyright 2016 CNA. All rights reserved.

3 Brian Carpenter Executive Vice President Willis Towers Watson Mr. Carpenter is executive vice president at Willis Towers Watson, where he is responsible for leading Willis s largest construction practice in Minneapolis and also co-leads the Willis Default Insurance Group. His understanding of the financial and operational side of the construction business has been instrumental in managing subcontractor default insurance programs for clients with sales ranging from $100 million to over $1 billion. Mr. Carpenter started his career in Chubb s surety department and then started a contract surety operation for Travelers Bond. After 10 years of underwriting experience, he joined a large national broker, where he managed the construction practice while also being a national resource for subcontractor default insurance. He earned the Associate in Fidelity and Surety Bonding (AFSB) designation and is involved with the Associated General Contractors of America (AGC), Construction Financial Management Association (serving as Chapter president in ), and Surety & Fidelity Association of America. Mr. Carpenter is a graduate of St. John s University and completed his MBA in 2006 at the University of Minnesota s Carlson School of Management. Workshop W2 3

4 Notes 4

5 The Past, Present, and Future of Default Insurance Brian Carpenter, EVP Education Connection Opportunity 20 Years of SDI What Have We Learned? A relied upon tool in a contractor s risk management toolbox Subcontractor prequalification is nearly table stakes Contractor rolling programs, or contractor sponsored project specific policies, are the standard Performance bonds remain the dominant tool for owner s performance security Workshop W2 2 5

6 20 Years of SDI What Have We Learned? (continued) Adoption by middle market (regional) contractors Additional capacity has entered the market Claims will happen; they can be very large Coverage clarity, expansion and restriction Risk awareness 3 Discussion Outline The Past of SDI 1995 to early 2016 The Present of SDI Q2 through Q The Future of SDI 2017 and beyond How will we accomplish this? 4 6

7 The Past of SDI Have the Originally Promoted Benefits Been Realized? Contractor controls Enrollment decision (prequalification) Default trigger Default remedy Will it pay claims timely? 5 The Past of SDI Have the Terms of Coverage Been Consistent? Tail Coverage Size and duration of individual subcontractor enrollments Minimum retentions generally up Type of work allowed to be enrolled Full limits; variable limits 6 Workshop W2 7

8 The Present of SDI What is the Competitive Landscape? Differentiation in: Coverage Structure Appetite Services Brokers Healthy competition driving innovation Human capital constraints 7 The Present of SDI What are the Market Dynamics Today? Have the originally promoted benefits of SDI survived? Control of enrollment, trigger and remedy Coverage terms Retentions and limits Policy language Program pricing Product utilization market acceptance or rejection 8 8

9 The Future of SDI How Might the Coverage Evolve? Underwriting focus Coverage terms Retentions and limits Policy language Program pricing Primary excess capacity? 9 The Future of SDI How Might We Evolve? Mindset changes Additional tools to manage the risk Claims expectations Contractors willingness to go bare on default exposure Workshop W2 10 9

10 Thank you for your participation 11 10