As the architects & engineers market hardens in reaction to demand for professional design services, independent agents can play a significant role in helping their clients secure coverage.
The Infrastructure Investment and Jobs Act (IIJA) includes investment in health care, public safety and other public infrastructure. The legislation is estimated to provide $1.2 trillion toward repairing the nation's roads, bridges, and electricity and water systems. This bodes well for the engineering and construction firms that are expected to complete the work, according to Deloitte's “2022 Engineering and Construction Industry Outlook."
Couple this with the current hot housing market and the impact could be significant for the architects & engineers insurance market.
“Any time there is a spike in demand and new construction in a particular project type, there typically will follow a corresponding rise in claims in that project type," says Larry Moonan, executive vice president, chief operating officer, Berkley Design Professional, a Berkley Company.
A rise in claims has resulted in architects & engineers market challenges, such as a reduction in capacity. While there is still plenty of insurance capacity available to design firms, Moonan highlights that “premium costs are trending upward as fees grow and claims reflect the impact of social and economic inflation, supply chain interruptions and a short supply of qualified technical staff."
As the A&E market hardens in reaction to demand for professional design services, here are three ways independent agents can play a significant role in helping their clients secure coverage.
1) Know your client. “Agents have an opportunity to demonstrate their value to their clients by presenting the firm's history and strengths in a transparent fashion to underwriters," Moonan says. “They can also add value by aligning their clients with markets that offer risk management programs and assist with contract review to help them better navigate risk."
“Counseling clients to engage in project types suited to their experience, capabilities and technical expertise is also important," says Brandon Perry, senior vice president and A&E large firm program manager, Victor Insurance Managers Inc.
2) Ask questions. When presented with a client's risk proposal, ask questions to ensure the client is appropriately staffed and has the bandwidth to take on the project and deliver the project on time and within budget.
“When a firm is not appropriately staffed, mistakes happen or documentation standards slip, causing things that make claims more likely to occur and a bit more difficult to defend," Perry says. “Agents should focus on their risk management capacity in ensuring standards can be maintained—agents serve a really valuable role in that process."
3) Emphasize designing with resiliency. “Catastrophic events, such as that in Surfside, Florida, has or will impact the way in which projects are designed," says Tameka Livatino, underwriting director, professional liability, Burns & Wilcox. “The use of simulated technology, due diligence in material selection, and vetting of design team experience is of the utmost importance when a contractor, architect or engineer is working on projects in certain climates or those that are susceptible to earthquakes and other natural catastrophic events."
In 2021, the Intergovernmental Panel on Climate Change concluded that global warming will continue to increase at least until 2050 and severe weather should be expected for at least the next 30 years. These findings have significant implications for A&E clients.
“Even before the collapse of the Champlain Towers South condo building in Surfside, Florida, architect and engineering professional societies have had a real focus on resilient design and on ways to design structures and infrastructure for climate resiliency," Perry says. “As standards for how you design with resiliency in mind become more commonplace, that's going to cause the standard of care to change and be incorporated into the insurance industry."
As a result, agents may need to be prepared to answer underwriter questions about resiliency that may include: How are you planning for the impact of a change when you're designing structures or infrastructure? Or what inspections services is the company responsible for?
“Underwriting requirements for A&E have been impacted over the past few years—discipline, project type, experience and location of services performed continue to drive underwriting rate decisions," Livatino says. “Additionally, underwriters are paying more attention to a firm's experience and risk management practices with peer reviews, contract usage, contract reviews and continuing education."
Olivia Overman is IA content editor.