November 12, 2019
Rising premiums for Wrap-up insurance
A number of WCA members have pointed out the increase in wrap-up insurance being specified as a requirement for being awarded a contract and a dramatic increase in premiums, particularly when there is hot roof work involved.
Wrap-up insurance protects the team involved in a construction project, such as owners, developers, engineers, architects, project managers and contractors, against third party and general liability exposures associated with a specific project.
Recently the risk profile associated with hot roof work has been identified as a concern by the insurance industry. This is a result of a number of high value losses associated with hot roofing work in Canada. Insurance rates are largely set by Lloyds of London in Canada and they have seen an increase in the losses associated with roof work. This has led to increased general liability premiums for roofing companies and an increase in cost in wrap-up insurance.
Since the wrap-up insurance needs to cover the cost of an entire building and the risk associated with hot roof work is perceived to be high, wrap-up insurance premiums are high regardless of the amount of roof work being undertaken.
We’ve heard from the insurance industry that wrap-up liability insurance is sometimes being required on projects where it provides little extra value
Implications for General Contractors – There is a significant increase in premium costs for wrap-up insurance when there is hot roof work. Be mindful of this large premium difference and take it into account when bidding on projects which require wrap-up insurance.
If a project is not too large or does not have multiple subcontractors, the value of wrap-up insurance may be limited since all general and sub-contractors will have their own general liability insurance. If a General Contractor sees the requirement for wrap-up insurance on tender documents where the insurance has little value but a large cost, it may be worth discussing with the owner if that requirement is appropriate.
Implication for Sub-contractors – The insurers we spoke to said that the use of wrap-up insurance on projects should reduce their general liability costs for the year, based on the proportion of projects covered by Wrap-up.
For example, if a roofer knows that on average 50% of their annual work is conducted under wrap-up insurance, the premium for that portion of their annual work should be a lower rate than the portion of work not covered by wrap-up. This highlights the importance of knowing and understanding the conditions of the prime contract.