Monday, April 4, 2011

Architects & Engineers Insurance: Submissions

When I was eight years old I thought I wanted to be an architect. I had a set of plastic girders and panels made by Kenner Toy Co, ingeniously called the "Girder and Panel Building Set". I made Cape Canaveral, or what I thought was the Cape. I tore that down and made a store, and then an office building, and who knows what else. As I got older I realized that I probably couldn't keep up with the math; Trig was about as much as I wanted to deal with. And by then I had discovered girls, sports and all manner of other distractions. While I didn't become an architect, I've never lost my fascination with buildings and their design, and I'm happy I can still be involved with this class of business as a broker.

Now that you know what I was thinking when I was 8, here are a few things you may want to think about when you are presented with an opportunity to write a business providing architectural or engineering services:
  • Revenue is certainly an underwriting consideration, but you will also need to obtain construction values. Annual revenue numbers are pretty obvious, but for construction values occasionally I'll see a submission that either shows "average" values or a "max" value. Unless stated otherwise, what the underwriters are looking for is the annual total value of all of your prospect's construction projects for at least three years, i.e. the "next" 12 months, the recently ended 12 mos and the 12 mos prior to that.

  • "Design-Build" firms. If your client is also involved in the building process, the carriers will need a breakdown of revenue between "design only" and "design-build" operations. Even if there's a very small percentage of "build", get the info anyway.
  • New in Business. Just like with any other class, if they're just starting an A&E operation, in addition to the app you'll need resumes for the principals. If they want to include names and descriptions of projects they worked on at a previous firm, that's fine, but don't have them send an electronic portfolio of everything they've done since college. If an underwriter really needs more info to qualify the risk they'll ask for it.
  • Change in ownership and/or operations. If a new owner takes over you may have a chance to get your foot in the door, especially if something about risk characteristics change. If they're now doing structural engineering and they've never done that before, the current carrier may be forced to non-renew or drastically alter pricing and terms. If they've just been given a contract for a job out of the country, the current carrier may not be willing or able to extend coverage. Find out if anything has changed or is about to change.
  • Specific Projects. Sometimes an architect or engineer will not have any professional liability (PL) insurance coverage and will be asked to bid on one project that requires evidence of PL coverage. As you would expect you'll need a full app and full details of the work they are going to do regarding this project to be able to arrange coverage.
  • Specific Client Excess. Similar to "specific project" coverage, but in this case one client of the A&E firm is requiring higher liability limits than the firm currently carries. Details of the project will be needed to underwrite this exposure, including name of client, services being rendered, the primary limit of liability and what carrier is writing that layer. A premium indication will be provided subject to review of the primary policy wording.
  • Competition/Other Carriers. Find out what carrier is writing the coverage currently. If it's an exclusive program for an association it will be tough to beat their pricing and it may save you some time and energy. If it's a surplus lines carrier you'll obviously want to figure out why (claims, areas of practice, location, etc) and make every effort to obtain terms from an admitted company. I've recently seen a couple of situations where the client of the A&E firm is requiring a minimum AM Best rating, and that may require the client to change carriers.
There are quite a few other considerations, but these are some of the more common ones. Let us know if you need more information or need to discuss a specific situation.

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