As a forum where risk and insurance are discussed in much, if not all, of their infinite complexity—notably project-specific designer liability, workers compensation loss ratios and claims documentation—the International Risk Management Institute’s Construction Risk Conference can fill your head with information, ideas and worries. Unlike the Associated General Contractors’ risk conference, IRMI’s conference is open to journalists.

That leaves attendees free to wander among all of the technical seminars, as I do, chatting with presenters and also mixing with numerous brokers and insurance carriers, at related sponsored social gatherings. 

It takes some time to find out what’s really on their minds.

If there’s one thing that stands out, it’s that while the complications, regulations, irritations and perplexities of construction seem ever more overwhelming, there’s a preternatural optimism. Not only are construction engineers and contractors confident they can design and build at a profit, they also believe they can transfer and finance much of the prodigious risks.

The recent conference in Orlando saw dozens of sessions at which insurers, brokers and attorneys, along with some contractors and designers, tackled everything from builders risk—and what is a defect or faulty work quality—to some of the latest theories of workplace safety and human error. Confidence reigned, with the players for the most part saying, “I’ve got this.”

It could be that after the COVID-19 pandemic, which generated payment and delay disputes that still are being sorted out, nothing else seems as daunting. But some anxieties that break through the surface in formal sessions, refreshment breaks and parties could scare the hat right off your head.

In one session, insurance carriers talked about raising prices and withdrawing from offering project-specific design liability coverage for large design-build projects. In my view, that’s just the insurance marketplace responding rationally to the industry’s failure to date to limit persistent insurance claims and lawsuits—including those from the contractor in a big design-build joint venture that seeks to recover costs of an overrun through legal action against its designer. Progressive design-build is seen as the solution.

Other risks are more general. In a keynote presentation, Travelers Institute President Joan K. Woodward cited research showing that cyber security is the pre-eminent risk keeping business people up at night. 

The past two years of cyber insurance increases of 100% to 200% (that’s not a misprint), have finally leveled off. But the prospect of having a ransomware attack shut down part or all of a firm's business operations—the average is 22 days—or spill private data into public view is at the top of the list. 

Michelle Chia, head of professional liability and cyber for Zurich North America, noted that some cyber risks are unquantifiable. But employers now routinely train employees against opening phishing emails and cordon off sections of their networks with passwords or encryption. It’s even helpful, said Chia, to keep vital information and phone numbers handy and on paper.

The optimistic message from the insurance industry was that now there is at least some kind of cyber insurance coverage for every company, and that if a subcontractor or vendor has no such policy or says it can’t afford one, that could be a red flag.

Nuclear Verdicts

Another general concern is nuclear jury verdicts—where a jury awards the plaintiff in a lawsuit a spectacularly high damage award, often involving punitive damages. Such awards can exceed an insurance limit or completely tap out an insured defendant’s basic policies and any excess coverage.

Another related concern is the effect of litigation funding companies on the already busy lawsuit pipeline. Several carriers told me that such suits, a consideration in underwriting, are driving up premiums and generally make risk finance more costly. Still another session dealt with the effects of natural catastrophes, many now more damaging or frequent due to climate change, on re-insurance markets where insurance carriers themselves cover their risks.