Masonry Magazine April 1987 Page. 36
CONSTRUCTION INSURANCE
continued
Umbrella insurers are not only underwriting the contracting risk but also are "underwriting" the contractor's primary liability insurer, discouraging. If the umbrella insurer believes the primary insurer is financially shaky, has been known to have less than adequate claims handling, or is using a primary liability insurance form which the umbrella insurer dislikes, the umbrella you would like to have and umbrella insurance provisions you have always had may not be available.
Despite this rather pessimistic outlook for 1987, the liability insurance market eventually will turn, but as I indicated above, not before the end of 1987. One of the brighter signals in this area is that the reinsurance market has begun to recover from its previous bout of insanity and is showing signs of offering more capacity to primary insurers, which will aid in their eventual return to the marketplace.
Bonding
Surety bonding always has been the "banking or credit lending" aspect of the insurance business. Losses of any substantial amount were shocking to a surety underwriter, something on the order of a banker's dismay over a horrible loan portfolio. This has not been true for the past several years. The surety loss experience has tracked that of some of the other insurance lines. This, as expected, has substantially reduced bonding availability.
This unique situation has been much exacerbated by contractors' problems of high expenses, low margins, and over-extension as to jobs capacity. Couple this sad scene with the surety's concern over a new impact on a contractor's finances, that of inadequate or no property casualty insurance coverages. Heretofore, such contractor coverages and their adequacy was only of passing concern to the surety. Now, it is of keen interest to them, because inadequate liability limits can bankrupt a contractor as easily as seriously underestimating a job. Moreover, high (too high) premiums for liability insurance boosts the contractor's expense ratio, compounding an already serious contractor financial problem.
Most observers believe, and I concur, that the bonding market probably will trail any liability insurance market recovery. As indicated, stable property casualty insurance markets with reasonably-priced available, adequate limits
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36 MASONRY-MARCH/APRIL, 1987