When any intense construction project is thoroughly underway, it’s always an excellent feeling to know that you are not over budget, things are running smoothly, and you’ll be finished on time. There have been many intense changes in the construction world lately, seeing contractors deal with a new set of pressures and demands. Supply chain issues that originated during the COVID-19 pandemic have not been completely resolved. Material costs remain high and skilled labor shortages are affecting important deadlines.

Contractors at a Crossroads: Navigating Economic Uncertainty

Many contractors are now taking on projects that are not where their expertise lies or even outside of their geographic location. Steep demand has shifted into the realm of apartment building construction and condominiums, and away from the traditional single-family home. Contractors that previously were taking up time in the single-family home segment will take on multiple projects just to keep their business alive but may not be prepared for the inherent risks involved. It’s not just interest rates that are affecting the overall climate: inflation on groceries and other everyday items has found its way into disrupting the already quite turbulent housing market. 

This means that unexpected delays can rear their head quickly, and the contractor will be less experienced in preventing this when it takes place. A general contractor who is beginning to take on work outside his market will have to have an entirely new set of subcontractors integrated into their daily mix. When any level of unfamiliarity with the typical work type becomes imminent, many different things could go wrong. Since tough economic times have dictated cutting corners, some insurance carriers are taking on more requests for policy extensions than they’ve ever seen.

Risk’s Shape-Shifting Nature: Strategies for Adapting Risk Profiles

Policy terms for larger projects can range from 3 to 5 years, and so many factors can change drastically and quickly. The overall risk profile, ever-present inflation, underwriting capacity, and limited deployment can dictate conditions for your project that may leave you as the looming bearer of bad news! When lumber costs increase, the entire project’s value is affected, and the underwriter may be forced to re-evaluate the entire transaction. 

Since experienced contractors are quite good at estimating time needed on the job, they pride themselves on quality work. When carriers are asked to provide extensions, they impose the same request on their re-insurance party. The reinsurer then can request documentation to expand on reasons why there were delays. Evidence is needed to move things along in a timely fashion, and it is not a simple process. Lack of supplies or experienced labor are a few of the factors that can trigger these time-consuming and unfortunate events.

Building on Borrowed Time: Balancing Quality and Speed in Construction

When a request is received for a policy extension, it sometimes comes when time is already beyond tight. When contractors run across major problems with efficiency and delivery, their priority is always to find a way to get working again ASAP! During these times, it can be difficult to sway other carriers to have any interest in the project and valuable time may have already been exhausted. A project with a $25 million tower and five or fewer carriers requires more legwork than it used to, as the need for policy extensions is becoming more frequent. 

Building Resilience: Collaborative Approaches for Insureds and Broker

The current economic climate makes delays of all sorts quite hard to avoid and requests for policy extensions are very common. To increase the chances of things moving in the right direction toward completion, it’s best to promote clear communication. The earlier it is known that a bottleneck is starting to form, the underwriters are the first in line to be informed. Final value, cost of materials and labor, and other issues will all influence just how smooth the long haul can be for an intense project.

The Edge of Expertise: Gaining Competitive Advantage in Underwriting

All these circumstances can take place so quickly and drastically affect the outcome of bids and projects that many depend on for their livelihood. Brokers are now needing competent underwriting partners more than ever, who understand the impact of a jagged risk landscape and a fragile environment. A proactive effort to ensure that brokers and insured parties are collaborating positively is well worth the time and commitment to understanding. Extensions have become a way of life in the construction industry, but the hard-working and very robust American backbone has still made 2024 productive.

We have long understood the value of specialized expertise in construction insurance! Uninterrupted project progress is the goal for many busy contractors in Missouri right now, and we have the knowledge and years of experience to properly support your construction endeavors. If things happen to get tough on the job site, we are always just a phone call away for advice and support! Let us be your trusted partner in navigating the uncertainties of today’s world, so you can focus on what matters most—building a brighter future for your business.