A new builders’ risk coverage is now available for insuring civil or public works projects such as highways, levee systems, airports, and other facilities.
The American Association of Insurance Services (AAIS) has released a new Civil Works Project coverage form with corresponding endorsements and rating procedures. These materials are provided in the Builders’ Risk section of the AAIS Inland Marine Guide, a leading resource of forms and rating procedures for the traditionally unregulated classes of inland marine insurance.
In addition to the countrywide release of the forms and rating information, AAIS is also filing the forms and rating procedure in states that do not exempt the unregulated classes from rate and/or form filing requirements. Those filings have a proposed effective date of May 1, 2016.
Civil works projects, such as highway construction, contrast with other construction projects in that they can extend over many miles, and because much of their value lies in the excavation and engineering of land, which is typically not covered in property forms.
Under the new AAIS Civil Works Project form, coverage is provided on an open-perils basis to “contract works” that are part of a “civil works project” described on an accompanying schedule.
Contract works include structures and materials like those insured under a standard builders’ risk jobsite form, but also includes two types of property typically excluded under standard builders’ risk policies:
- Altered or added land and earthworks, a principal component of many civil works projects; and
- Special machinery or equipment used for the project that cannot be used again (In some civil works projects, the cost of removing certain pieces of underground equipment exceeds their value, so they are abandoned).
In addition, the Civil Works Project form extends the insured “course of construction” to include the period during which a completed portion of a project is put to use while other parts of the project are still under construction.
Also, coverage under the Civil Works Project form does not cease as long as the insured has an insurable interest in the project (Builders’ risk coverage typically ends when the purchaser accepts the project as complete).
The procedure developed by AAIS for pricing Civil Works Project coverage modifies standard builders’ risk rating to reflect unique features of public works projects and new capabilities available through the AAIS Underwriting Platform, a cloud-based application for supporting AAIS programs.
For example, the Civil Works Project rating procedure includes factors for modifying premium to reflect the concentration or spread of insured property. The less concentrated the properties, the greater the credit applied to the basic loss load.
Also, for civil works policies that add flood and earthquake coverage by endorsement, factors have been incorporated to reflect flood and earthquake sublimits. The lower those limits are compared with the total insured value, the greater the credit applied to the flood and earthquake loads.
These calculations but can now be done with the support of the Underwriting Platform (UP), according to Robert Guevara, AAIS vice president of inland marine, and the principal developer of the Guide.
UP is a comprehensive rating and quoting engine that provides cloud-based, centralized program maintenance. The system automatically identifies applicable forms and endorsements, calculates premium based on coverage selections, and stores underwriting information for analysis and reporting.
UP was first launched in 2013 to support the AAIS Commercial Output Program, and was extended in 2014 to support four construction classes of the Inland Marine Guide.
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