CSIS Insurance Services, Inc. Blog
Due to the current crisis worldwide, there has been a continuous risk for leaders in construction insurance and how they will be advising clients regarding the financial impact of the coronavirus. The issues mentioned below consist of fundamentals and suggestions that may counter other publications.
Focus on Collecting Cash and Payments
Payments and cash flow should be the focus of insurance companies. Most contractors will need to stockpile on funds, mainly because there is uncertainty on how long the pandemic crisis will continue. During the crisis, owners’ payments will most likely decrease, and construction managers will try to hold on their money for as long as possible.
Those anticipating for new contracts, both open-shop and union subcontractors, now have a reduction in staff.
Insurance Collateral and Cash Flow
Contractors should begin optimizing collateral under the policies for liability and workers’ compensation. They can use the collateral for deductibles due to contractors making a claim. Most of the time, it is also a letter of credit and sometimes, as cash. The industry now has focused itself on using data analysis for collateral optimization.
The main idea is for contractors to approach their insurers as often and early to ensure they have agreements on the collateral calculation. Improving or using the balance sheet or deleveraging it with less collateral also provides promising benefits. They can also use a surety bond as an option to replace or use as partial security for collateral under the workers’ compensation policy.
Not So Fast on Force Majeure
Frank Guinta, a risk consultant and partner for contract HKA, mentions about the prematurity of force majeure clauses in the arrangements. So far, various published stories focused on those clauses. He says how clients shouldn’t inform owners about force majeure clauses in the contracts.
Force majeure clauses allow time extensions and delays. Still, they will not provide a contractor entitlement for more money, which contractors need for extra expenses covered in demobilizing and immediately going back to work. Most insurance policies also don’t provide coverage for government acts, including lockdowns.
Businesses everywhere have shut down, and construction has most likely stopped their tracts to preserve their health. Whether their insurance provides coverage on certain risks will have to depend on their policies. Talk to your insurers now and make sure you have the protection you need.
At CSIS Insurance Services, Inc., we aim to provide comprehensive insurance policies that make your life easier. We want to help you get the insurance that fits your needs. You can get more information about our products and services by calling our agency at (888) 501-2747. Get your free quote today by CLICKING HERE.
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