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Regardless of the structure selected for your project, implementing a CIP is a unique way to manage a multitude of insurance challenges that arise on construction projects. The CIP (controlled insurance program) structure provides significant advantages to a project which include:
- dedicated insurance limits
- completed operations coverage
- a reduction in cross litigation (since all enrolled parties are insureds under the same policy)
- increased opportunity for MWDBE participation
- potential for direct insurance cost savings
OCIPs and CCIPs fall into 3 main varieties: single project placements, rolling programs, and GL-Only.
Single Project Placement
A single project CIP placement is a custom product tailored to the specific needs of the project being insured. The coverage provided includes Workers’ Compensation (WC), General Liability (GL), and Excess Liability. The total limits purchased generally range from $50M to excess of $200M. The carrier selection, coverage negotiation, and program design all take place in the months leading up to the project construction start date. Single project CIPs tend to work best and yield the greatest financial results with projects that are over $250M in construction volume, this is due to the economy of scale present in large projects. Carriers competitively rate these projects as they will yield higher premiums.
If the program is placed as an OCIP (Owner Controlled Insurance Program), the owner will recognize any cost savings or overrun at program close.
If placed as a CCIP (Contractor Controlled Insurance Program), the general contractor will retain the financial risk/reward.
Rolling Program
Under a rolling program, the project would be enrolled into a pre-existing insurance program with a set carrier and established terms, conditions, and pricing. The coverage provided (WC, GL, Excess), the limits available for purchase and the work necessary to place and administer the CIP as well as the financial risk/reward are identical to those of a single project placement.
Only general contractors and owners with a steady flow of work can support the project enrollment requirements of an annually renewing program. The main advantage of a rolling CIP is certainty as the sponsor has already negotiated the particulars with the carriers and can deploy that program as projects incept. Rolling OCIPs and CCIPs typically support projects under $100M in construction volume as a project of that size generally cannot support the premium required for a dedicated CIP. The sponsor retains the financial risk/reward for the program.
General Liability Only
General Liability Only (GL-only) CIPs have become prevalent over the last decade. These CIPs are designed to provide GL/Excess coverage only for the enrolled parties, and do not include WC. They can be placed by the project owner or the GC. The WC coverage remains the individual responsibility of the contractors (including subcontractors) working on the project.
Alternatively, the GC may offer a WC-only CIP. The GL-only CIP structure has unique advantages:
- they have the benefit of a lower retention (as low as $50K)
- no requirement for collateral
- they take advantage of economies of scale due to project size
- have a reduced administrative burden to the sponsor since contractor enrollment does not require the tracking of payroll.
A disadvantage with GL-Only CIPs is the reduced ability of the sponsor to obtain a financial benefit. With the WC being provided by the individual contractors, the cost of the insurance is based on the contractors’ size and may yield a higher cost than a single WC placement for the entire project. Additionally, some contractors may include a provision for deductible funding within their contract price, leaving no opportunity for savings to the sponsor as reward for providing safety, loss mitigation and claims management. GL-Only CIPs are most common for projects that have unique risks and with sponsors not interested in the financial risk/reward outcome of a loss sensitive program.
As a highly specialized insurance services firm, TSIB focuses on the construction industry and CIP placement. TSIB has the skills, personnel, market reputation and experience to evaluate all CIP options and ultimately implement the insurance solution that best meets the needs of our client and project stakeholders. Reach out to TSIB to learn more!
TSIB’s Risk Consultants are currently servicing the following locations:
East Coast: New York City, NY; Bergen County, NJ; Fairfield County, CT; Philadelphia, PA
Texas: Austin, San Antonio, Houston, Dallas
California: Orange County, Los Angeles County, Riverside County, San Bernardino County, San Diego County
