Many large construction projects have become more difficult to finance because of certain economic and logistical challenges in the construction marketplace. An overall increase in construction costs, risk management controls, and an uptick in litigation also contributes to the challenge.

Wrap-Up Defined

Wrap-up programs, also referred to as Owner Controlled Insurance Programs and Contractor Controlled Insurance Programs, bring all the construction insurance costs into one master policy which eliminates the gaps in coverage. The Wrap-up program sponsor can be the project owner, general contractor, or construction manager and allows contractors of all tiers to enroll in the program.

The typical coverage usually included are workers' compensation insurance, employers liability insurance,  general liability, commercial umbrella and builder's risk insurance while commercial auto liability and inland marine are excluded from the policy and should be insured on a separate policy by the contractors in their individual insurance programs.

Where Wrap-Ups are Used

Generally, a wrap-up policy is used on large projects where project costs are estimated to exceed $100 million dollars. The policy sponsor or master entity will purchase the policy thereby providing the insurance benefits of broader coverage and higher limits, delivering safety and claims management, coverage for difficult subcontractor risks, and delivering a significantreduction in insurance costs for those entities enrolled. Typical construction projects that make use of Wrap-ups are:

·         Schools and Municipal programs

·         Condominiums and single family home communities

·         Office and medical complexes

·         High rise office buildings

·         Municipal infrastructures

·         Refineries and chemical plants

·         Automobile plants

·         Industrial complexes

Solutions and Compliance

The insurance organization offering the wrap-up program typically assists with studies, compliance issues, and claims management responsibilities involved with managing the wrap-up program. They will initiate a feasibility study to determine whether a wrap-up is a viable solution for the construction project at hand and determine the lines of coverage included and the estimated savings for the sponsor of the program.

The insurance organization will also determine the regulatory requirements in the project's jurisdiction and develop manuals that outline the enrollment process and the program details which includes coverage required and offered under the program. The insurance administrator will typically assign a team consisting of a Risk Manager, Claims Professional, Safety Professional, and CCIP Administrator to help manage all aspects of the program. The Safety Professional generally offers consulting services specific to the wrap-up in an aggressive manner and provides employee training while the Claims Professional will provide analysis and management of claims. 

Why the Emphasis on Feasibility?

A well- conducted feasibility study is used to uncover exposures and project characteristics that could affect the wrap-up program in either a positive or negative manner. Most importantly for the stakeholders, the feasibility study will determine the ROI for the program and the coverage solutions that could be realized by all members of the wrap-up. It's important to note that the realistic feasibility study should also include a current and well-prepared proforma for the project. The proforma paints an accurate financial picture of the project as it takes all costs into consideration and then calculates the ROI based on the costs anticipated. If you have questions about construction project wrap-ups contact Skyline Risk Management, Inc. at (718) 267-6600 to discuss your concerns.