All right. Hi everyone. If you've been with us for the previous two sessions, congratulations. You've made it to day three of our four-day virtual class. And for those joining for the first time today, welcome to Inland Marine Underwriters Association's class, Introduction to Inland Marine Builders' Risk Insurance. I'm Lillian Coulson, and I'm thrilled to introduce today's session. Please use the question box on your control panel to ask questions. If you find your control panel has minimized by default, simply right-click the orange arrow to recover access to your control panel. And Kody, can you move it to the next slide? So, I'd like to reference IMUA's policy statement. And in keeping with the statement, I'd also like to remind all participants today to refrain from entering into any discussions on matters affecting rates or conditions of insurance contracts. A PDF of the Builders' Risk presentation is available from the handout material icon located on your control panel. And we actually will email to you an updated version of the PDF that will have a few updates that Kody made to the presentation. Our instructor today, Kody Williams, will announce a 10-minute break approximately every 50 minutes. Kody looks forward to your questions. To encourage your participation today and to keep it fun and interactive, at the end of the class, Kody will select an engaged attendee to receive a $25 Amazon gift card. So, keep those questions coming today. Now let's get started. I'm delighted to introduce our instructor, Kody Williams. Kody has been underwriting in the Inland Marine space for the past nine years. A 2015 graduate of Georgia State University, Kody began his career in underwriting with various MGAs in the Atlanta area and then went on to spend several years with Zurich as a construction property underwriter out of their Dallas, Texas office. In 2023, Kody transitioned to SOMPO International, where he assumed the role of Assistant Vice President, Engineered Risk. With a continued focus on builder's risk and contractor's equipment, Kody's expertise became further refined as he navigated the complexities of engineered risk. And Kody doesn't just excel in the world of underwriting. He is a member of IMUA's Southwest Regional Advisory Committee that plans Inland Marine insurance education in the Dallas metro area. He is also a seasoned and enthusiastic instructor with the Inland Marine Insurance Underwriters Association, which is fortunate for us. His passion for sharing knowledge shines through as he instructs this class both in person and as part of the intro track at our annual—in person as part of the intro track at our annual meeting, as well as virtually, as he's doing today. When not underwriting or instructing, Kody enjoys cooking, traveling, and watching the NFL, especially the Philadelphia Eagles. Let's give a warm virtual welcome to Kody Williams. The floor is all yours, Kody. Thank you for that introduction, Villy, and I really appreciate the opportunity to give back and teach this virtual class on kind of intro to builder's risk. So while we are all virtual, certainly want as much participation as possible. So if you have any questions at all or any comments that you want to throw my way during the presentation, feel free to do so. I'd be happy to answer anything you have or speak on any comment that you want to make as well. So that being said, we are going to just dive right into the presentation this afternoon, and we're going to start it off with a poll. And I will go ahead and launch our poll here. And so you'll see the question, builder's risk. Should it be A, builders with an apostrophe S, B, S with an apostrophe after, or C, as in it's good for me, I don't like to rock the boat. And I will give you all another 20 or so seconds here to answer. All right, it looks like we have a good amount of the votes in, and it looks like 49% of those who participated agree with me that it should be builders, I'm sorry, with an apostrophe, then an S. Oddly enough, I feel like I've seen it always shown on this, or as far as the choices go on this slide. I don't remember much from grammar class, but I thought it was supposed to be apostrophe S, but funny enough, you'll see it in all different sorts of ways. And then funny enough, even you'll see builders referenced too as EAR or CAR coverage as well. So in typical insurance fashion, quite a few different names for – are all referencing the same thing. So just running through a quick roadmap of what this presentation looks like today. We'll first start with why should we even discuss builder's risk? We'll then go into terms and conditions that you should absolutely know, how to underwrite and price a submission. We'll have a few slides about that. And then we'll end our presentation today with interesting requests and, lastly, a current state of the market. That being said, so this is intended to be – or we are intended to go until 5 p.m. Eastern today with two 10-minute breaks. So I'll be sure to be clear when it's time for us to take a break. So starting off, why is it important? Why should we even talk about builder's risk insurance? Who should really care? So first off, builder's risk is one of the three queens of the inland industry within inland marine coverages. There's quite a few different coverages that make up the inland marine umbrella, but I'd say that the main three ones seem to be builder's risk, contractors' equipment, and probably cargo. But that being said, from a premium standpoint, builder's risk is certainly a significant part of the inland marine umbrella. And there's no slowdown in construction. We saw that during the pandemic with construction being deemed essential that there's a lot of construction going on in the country. And that trend seems to be applied worldwide across the globe as well. Who doesn't write builder's risk? That's kind of a sarcastic point there. But there's a lot of players in the builder's risk space, and it seems like that the number of participants in the builder's risk space seems to only be growing. With the onset of MGAs and just other carriers looking to capitalize off some of the profitability that can be made in the builder's risk market, you see a lot more folks offering this coverage. Builder's risk can be purchased by both owners or general contractors. That's one thing I certainly want to hammer home in this presentation is that while the builder's risk, the name and shirt can be in either the owner, which is the person that is funding the project, or the general contractor, the person actually building the contract. Realize that as builder's risk underwriters, we're underwriting the general contractor, regardless of who the name and shirt is on the policy, with the understanding that the general contractor is the one that's going to actually be out on the job site building whatever we're covering. Whether it be a typical building or some type of bridge, civil project, it's general contractors out there that's going to be causing the losses that we would have potentially had to cover. Builder's risk can be in, as far as name and shirts go, different entities within the project. Builder's risk can also be complicated. You have the fixed location of the job site itself, but you also have transit exposures as building materials travel across the world to get to the job site. Or you even have job sites that might be large as well. You think of a large pipeline that we could be insuring that could cover a lot of ground. Think of a road project, same idea. It could cover a lot of ground as opposed to just covering one building or one office or college campus project. When it comes to the world of builder's risk and construction, it can get very complicated and it can also be very simple and everything in between. Builder's risk addresses them all. We just have two stats around about overall construction in the country. You'll see in the top right there, construction output in North America will grow by 32% from 2020 to 2030. We only expect the amount of projects that will need builder's risk coverage to be increasing as we move forward. I'm sure carriers realize that. As I mentioned before, you see a lot more players entering the space. Lastly, the construction industry has demonstrated remarkable resilience during the worst of the coronavirus pandemic and over a period of significant disruption to the global economy. The worst is the Great Depression some 80 years ago. Again, all these just speak to where construction is today in regard to certainly not slowing down. In fact, it's picking up. Again, with the insurance being tied to these construction projects, it's only going to be more and more need for builder's risk coverage. All things to look forward to. Moving forward, another significant event to discuss when it comes just to the context of construction and where we are right now and where we see ourselves going in the next few years. We need to certainly bring up the infrastructure bill that was passed back in November of 2021. As an underwriter, this is music to my ears because it guaranteed a lot of funding for construction in different areas in the country. As an underwriter, it takes new construction projects in order to keep us employed and have projects to look at and to underwrite and to insure. Infrastructure bill was a big deal. Now I'll go through different aspects of the bill and what it means for not only the country, but for us as insurers in the builder's risk space. Again, this bill was passed in 2021. While it's normally just referred to as the infrastructure bill, I guess the real name is the Infrastructure Investment and Jobs Act. Again, passed in 2021 and it invested heavily, $550 billion in infrastructure over the next five years. I guess starting at the top there, of the $550 billion, you have $47 billion be designated to rebuild roads and bridges. One in five miles or 173,000 total miles of our highways and major roads and more than 43,500 bridges are in poor condition in this country. Bridges in poor condition pose heightened challenges in rural communities, which often may rely on a single bridge for the package of emergency service vehicles. And so this bill was intended to reauthorize federal surface transportation programs for five years and invest to repair our roads and bridges and support transformational projects that will create good paying union jobs, increased regional and national economic opportunities, and also make our transportation system safer and more resilient. The bill also deployed $39 billion to modernize public transit. America's public transit infrastructure has faced decades of underinvestment with an estimated $105 billion of repair backlog, representing more than 24,000 buses and vans, 5,000 rail cars, 200 passenger stations, 300 maintenance facilities, and thousands of miles of track, guideway, signals, and power systems in need of repair or replacement. Switching for personal vehicle use to public transit can also reduce greenhouse gas emissions for the transportation sector, which is now the largest single source of emissions in America. And so this bill invests to repair and modernize transit. The legislation supports expanded public transportation choices nationwide, replacing thousands of deficient transit vehicles, including buses with clean, zero emission vehicles, and improving accessibility for elderly people with disabilities. The bill went on to invest $66 billion in passenger and freight rail improvements. And unfortunately, U.S. passenger rail lags behind the rest of the world in reliability, speed, and coverage. This infrastructure bill gives an opportunity to position our railways to play a central role in our transportation and economic future. Our rail networks have the potential to offer safe, reliable, efficient, and climate-friendly alternatives to driving or flying. So this bill invests much-needed resources for the Department of Transportation's rail programs. And this includes funding to modernize the Northeast Corridor and bring world-class rail service to areas outside the Northeast and Mid-Atlantic, refurbish Amtrak's fleet and facilities, and upgrade freight rail service in rural communities and on shared freight passenger routes. This legislation enables the Federal Railroad Administration to lay the foundation for a sustainable rail investment program on par with other modes of transportation that advances safe, clean, equitable, and efficient world-class passenger and freight rail. Which is exciting news to hear as we compare America's current rail status and what we offer from a trail and railway to other countries who certainly are behind. So it's exciting to hear that we are trying to catch up to the rest of the world in that regard. So the bill also invests $65 billion in broadband infrastructure. So from a broadband perspective, quality Internet service is necessary for Americans to do their jobs, to participate equally in school learning, health care, and to also stay connected. Yet by one definition, more than 30 million Americans live in areas where there's no broadband infrastructure that provides minimally acceptable speeds, which is a particular problem in rural communities throughout the country. And according to the latest data among 35 countries studied, the United States has the second highest broadband cost. And so this bill will help ensure that every American has access to reliable high-speed Internet through a historic investment in broadband infrastructure deployment. And this legislation will also help lower prices for Internet service and help close the digital divide so that more Americans can make full use of Internet access. So moving on, the bill also invests $42 billion in port and airport infrastructure, which certainly can speak to the tick in airport building for submissions I've certainly seen, and I'm sure I'm not the only one on the call that's seen these airport submissions coming through, as well as the rest of the submissions tied to these sectors. But from an airport standpoint, the United States built modern aviation, but many of our airports lag behind our competitors. According to some rankings, no U.S. airport ranks in the top 25 of airports worldwide. And this bill invests to address repair and maintenance needs, reduce congestion and emissions, and modernize our national aerospace system. And along with the airport infrastructure, we also invested, or the bill also invested in port and waterways infrastructure as well. And the United States underfunded port and waterway infrastructure has real costs to families, our economy, and our global competitiveness. The surge of both imports and exports moving through outdated infrastructure as we recovered from the COVID pandemic has strained our ports and their intermodal connections and slowed the global supply chain. But to support our growing economy, we must strengthen our supply chain and invest in the transportation systems that move cargo to, through, and from our ports. So this bill invested to improve infrastructure at coastal ports, inland ports and waterways, and land ports of entry along our borders. So also the bill invested $73 billion to modernize electric grid and clean energy transmission. Again, we've also seen a ton of solar projects coming through recently that I know this bill certainly has impacted. And so our energy system is in desperate need of modernization and reform to increase resilience and bring low cost clean energy to more Americans. Power outages cost the U.S. economy up to $70 billion every year, and one in three U.S. households face challenges paying their energy bills. Many promising clean energy technologies that can help to meet our climate goals work in the lab but have yet to be demonstrated at scale. Many of our homes, schools, and offices are inefficient, contributing to high energy bills and air pollution. And for too long, we have ceded ground on manufacturing to our global competitors. So this bill is the largest investment in clean energy infrastructure in American history. It will modernize our power grid by building and upgrading thousands of miles of resilient transmission lines to reduce outages and energy costs and facilitate the expansion of clean energy. It will invest in energy efficiency and clean energy improvements in our homes, schools, businesses, and communities to make them cleaner and more affordable. And it will fund new programs to support the development, demonstration, and deployment of cutting edge clean energy technologies to accelerate our transition to a zero emission economy while also creating good paying jobs and investing in manufacturing and communities across the country. And lastly, the bill invested $55 billion to upgrade water infrastructure. So our nation has underinvested in water infrastructure for too long, putting communities at risk. Lead pipes, water main breaks, contamination, and failing wastewater management systems threaten the safety and security of Americans across the country. Long-term drought and water shortages in many areas of the nation, fueled by climate change, have laid bare underinvestment in water reuse, conveyance, and storage infrastructure. So this bill's investment represents the largest investment in drinking water, wastewater, water reuse, conveyance, and water storage infrastructure in American history, including dedicated funding to replace lead service lines and address the dangerous chemicals. So all of that to say that, again, the uptick in submissions around these sectors should happen. You know, I've certainly seen it already and will hopefully continue to happen for years to come. And as an underwriter, you know, this is all exciting news for us because it's always exciting when you get more projects to underwrite and look at. And I honestly particularly enjoy these types of projects because they're a little more complicated than the everyday office building or typical four block construction. So, exciting times. So, terms and conditions. The policy creates exposures that you need to address, and that's why we start with a look at the coverages themselves. So, that's funny, terms and conditions, but, yeah, a lot of underwriters just call it Ts and Cs because I do agree that it does sound way cooler. That being said, you know, I can't stress enough as an underwriter how important it is to know the terms and conditions of your coverage form compared to the other coverage forms of your competitors out there. You know, I think that when it comes to builder's risk insurance, while some coverages or subcoverage forms can differ significantly from others, for the most part, a lot of us are selling a similar product. And I've found that that's where the value as an underwriter is truly found when you are familiar with your terms and conditions and you can explain things and you, again, you kind of know what separates you from the competition. I couldn't implore you more as an underwriter to just really be super familiar with those terms and conditions. I used to have an older mentor always tell me that, you know, every now and then, just as a refresher, it's always good to read your coverage form. And that, yeah, it may put you to sleep at times, but still a very important document to be familiar with. So if you don't take away anything from this presentation as an underwriter, I hope you would at the very least just remember to always know your terms and conditions and always be refreshed on the forms that your company is offering. So, again, talking about coverage forms from a policy construction standpoint, you have ISO forms, AAIS forms, proprietary forms. And so the insurance industry has two main rating bureaus, the American Association of Insurance Services, which is abbreviated as AAIS, and the Insurance Services Office, Inc., which is abbreviated as AAIS. So both AAIS and ISO are responsible for publishing standardized policy forms and providing statistical data and analytics, but the two entities do have some differences. While AAIS is a nonprofit kind of advisory organization, ISO is a for-profit corporation whose parent company is Veris Analytics. And AAIS serves its members who are primarily property and casualty insurance carriers, while ISO serves insurers as well as reinsurers, regulators, agents, brokers, risk managers, and others in the P&C insurance industry. And so from the standardized forms, those are your main two entities. And then you also have proprietary forms, which are also common amongst different carriers. But even brokers may have their own proprietary form, and they may ask carriers to apply to a builder's risk placement. But that's just simply when whatever company you work for comes up with their own forms with using their own legal team and lessons from industry losses and whatnot. So also very common to see proprietary forms. But then you also have manuscript forms, and these come in when a company or an insurer doesn't have a standardized form that addresses a certain need within a policy. And so just like an example of a manuscript endorsement could be, it's been projects in the past to where it might be a concern around the temporary storage of building materials. And so while the builder's risk policy, which we'll dive into later in this presentation, may give some type of blanket coverage for items that are being temporarily stored for the builder's risk project, because it's given on a blanket limit, the limit that is given may be lower than what a particular broker or insurer is requesting for the project. And so I had to use a manuscript endorsement that just simply actually listed a specific storage site that we would allow a higher transit limit to be applied to as opposed to having to give the higher transit limit on a full blanket limit. So again, there was no endorsement that already existed to where I could just name the physical address of the offsite storage location to give that higher limit. So we just had to come up with a manuscript endorsement that did so. Manuscript endorsements are also pretty common, but from a compliance standpoint, obviously you have to work with your compliance team to make sure everything you're doing and your offering falls within the laws and regulations of whatever state that you're operating in. So now we're going to do our next poll here, which you'll see the question, my company uses either A, ISO forms, B, AAIS forms, C, a combination of proprietary with ISO or AAIS language, or D, completely proprietary. And I will launch this poll now and give you all some time to answer. Excellent. Thanks, Cody. And when you share the results, just leave them up for a second so everybody can kind of see where they all landed. Sure, you know, definitely be sure to share the results and hopefully you can see it on your end. I didn't realize you couldn't before. Right, you just get close and then share and then once you share it, we'll see it. Okay, gotcha. I'll give it a few more seconds here. All right, let's see, close and share. Now we see it, thanks, David. Okay, perfect. Thank you, so as you all can see in the results, most folks on the call went with combination of proprietary with ISO or AAIS language, which I would say seems to be the most common for sure, but I've also certainly have seen ISO and AAIS forms as well. So thanks for the participation on the poll to all the attendees. I will hide that and move on to our next slide. Great, okay, so just running through the different sections of the standard contract or insurance policy. Remember, insurance policy is just another fancy word for a contract between all parties involved at the job site. And so again, you'll see the different sections of the policy. We're gonna go through covered property, property not covered, followed by additional coverages, covered causes of loss versus exclusions, limits of insurance, deductibles, conditions, and then definitions. And all of these sections could change from policy to policy. So again, just can't stress enough how important it is to familiarize yourself with the coverages that you're offering, the exclusions that you're applying, how you define certain things, which again, we'll touch on as we get deeper into the presentation on why those things are important and how they could differ amongst companies and insurers. So what are we covering from a builder's risk perspective? So we're looking to cover direct physical loss or damage to buildings or other structures during the course of construction. It's funny, because a lot of times when I talk to folks outside the industry, they ask, what do you do? I say, I work on builder's risk insurance as an underwriter. They normally ask me, what's an underwriter? And then they say, what's builder's risk? And my quick answer is always just property coverage for things under construction. And that's always the way I've viewed it. So pretty simple there. From a construction material standpoint, which we'll dive into the next slide as well, that'll go into further detail on what we mean by construction materials. But we're looking to insure construction materials, supplies, fixtures, equipment, machinery, and similar if intended for permanent installation at the project site. So the key point there being, again, permanent installation, any temporary items we're not really looking to insure, but things that are permanent, we are looking to insure. And I also wanted to stress that, again, we are looking to cover loss from physical damage to buildings or other insured structures on the job site, with the key word there being physical damage. Or there is no builder's risk coverage that can be triggered without physical damage. So you have to have physical damage to the site in order to trigger any type of builder's risk loss. And that was always a big deal during the pandemic. I remember being asked a lot of, how is COVID-19 affecting our builder's risk coverage? And other than slowing down how fast materials got to the site, that, for the most part, was pretty much it. Because, again, you need physical damage to trigger any builder's risk coverage. And so without that physical damage, then we have no losses to talk about. Also, what is the policy term? That may differ from carrier to carrier, from wording to wording. But for the most part, we should be starting the builder's risk coverage, which this is a hot topic amongst brokers. But we should be starting the builder's risk coverage once anything we are insuring gets to the job site. And so some may think, oh, we should start the builder's risk coverage when the vertical construction starts, or start it when, I don't know, as soon as we order the materials. But it's really once things start getting on the job site, then that's what we're looking to cover. And so moving on to this next slide, what do we mean when we want to cover buildings or structures? So this is the AAIS definition. Again, depending on what coverage form you use, your definition may differ. But buildings or structures means, A, buildings, B, structures, C, materials and supplies that will become a permanent part of the buildings or the structures, and D, foundations, excavations, grading, filling, attachments, permanent fencing, and other permanent fixtures. And so, again, if we're looking to start the builder's risk coverage once anything we are insuring is at the job site. And so really look at letter D there, from a foundations, excavations, grading, filling, from that standpoint. You know, it's one thing if the insured is out there just moving the dirt that's already at the site to try to excavate or level something. But once you start bringing, you know, that fill or any grade to the site, then, you know, we are insuring this project. And so another thing to stress here is that, you know, as opposed to property insurance where you have 100% of the values exposed on day one of your policy terms, with builder's risk insurance, it's the opposite in that you start at a, you know, zero values, just a patch of dirt, and then you end the policy term with 100% of the values exposed. And so in an effort to adequately fund for losses throughout the life of the policy, it's really important that we charge against the appropriate policy term. And so, again, I just bring this up because there's been so many situations I've been in to where, you know, site work might already be completed and now we're looking for vertical construction. And now, Cody, we just want the builder's risk policy to start once vertical construction starts and move forward. But it's important to note that, you know, site work can be very expensive. And there's also a lot of exposure in site work. And when I say site work, I just mean the excavations and bringing on the fill and whatnot to make sure that the ground is ready for you to actually start building vertically or build whatever direction your project is going, whether it's horizontal for a pipe or vertical for some sort of building. So that being said, again, we need to adequately fund for losses. And it's important to note that work that takes place during the site work phase might not cause a loss to materialize until you're in the vertical construction phase. And so that's why it's so important for us to make sure we're contemplating everything when we are rating our builder's risk projects. And it's also why our builder's risk rates are much lower than if you were to go into the property market and look at those rates. Because again, we are contemplating the buildup of values from a patch of dirt to your completed project. And we'll also touch back into that later in the presentation when we talk about extensions and whatnot when it comes to buildup of values. And, you know, are builder's risk insurance not really intended to act as operational property insurance given the pricing and deductibles being so much lower in builder's risk than what you would see in the traditional operational property market. It's also important to talk about when coverage ends. I know I mentioned when coverage starts, but again, as we talk about extensions later in the presentation, we'll take a deeper dive into that. So these are some examples of different builder's risk projects that we can insure. You really see the gambit in builder's risk. Now granted, I'm sure we have some underwriters on this call that may work for a company with a very small appetite. That maybe you only want risks within a very small box. And, you know, that's kind of what you feel comfortable with and you just want to underwrite that. And hey, nothing wrong with that. But on the flip side, you also have companies that have these underwriters and you also have companies that have the opposite approach that have a very broad appetite and are willing to almost insure just about anything for the right pricing and terms. And so I thought this picture did a pretty good job of showing the different types of maybe non-traditional builder's risk projects that you may see out there. I think it's really easy to think about your traditional four-wall construction. So again, office buildings, multifamily buildings, that's kind of where most folks' mind goes as soon as you talk about builder's risk insurance. But you also have a lot of other types of projects. And as I went through the infrastructure bill, you know, that kind of speaks towards that. But you got bridges up in the top left, which this one looks to be a pretty, well, I'd say all bridges are risky, but this one is even more of a risky bridge as it's over water. So just as an underwriter, it's always something you have to think about and take it to account. And if you aren't familiar with the building process of how they dry out that river in order to build those large foundations and put it in the ground to support that bridge, you should check it out. It's a pretty cool process. They use something called coffer dams to dry up whatever area of water that you have to get into. But I got to say as an underwriter, when you look at it, you're probably going to be like, oh man, I don't know if we should ever underwrite any of these large bridges, because it does certainly look pretty risky, but all cool nonetheless. And again, would implore you to take a look into that if you aren't familiar. So moving on to the right, a long windy new paved road there. So road and street and road projects are certainly projects that we see a lot of in the builder's risk space. And again, that can be kind of challenging just because it can be very long and it can go through multiple, from a natural catastrophe exposure standpoint, depending on how long it is, it can go through many different levels of cat exposure. Part of it might be in a flood zone, the other part might not be in a flood zone, things like that. So always important to just kind of notate that as an underwriter in order to figure out what kind of terms you're going to offer. To the left, you see those big pools of water and it looks like some type of water treatment facility. Again, tied back to the infrastructure bill, only going to see more of those types of projects moving forward. Then you have what appears to be a pipeline project, which can be pretty risky, given that they have to do what's called horizontal directional drilling across or underneath ground in order to make the trench for the pipe. And those things can oftentimes collapse and be very expensive to redo. But that being said, while I guess the appetite for long pipelines are much more limited in the builder's risk space compared to typical four walled building, there's certainly still a significant amount of insurers operating in that space. And so, you'll see a lot of pipeline projects out there as well. Then you'll see a wind farm next to that, certainly seen an uptick in wind farm constructions, again, tied back to our push as a country to implore more clean energy. And then lastly, in the bottom right, you have what looks like to be some type of dam project. And again, going back to that infrastructure bill, only gonna see more of these, which is good for us. But again, these projects are risky. And so, from an underwriting perspective, it's really important that we push for terms and conditions, not only individually, but really across the industry for some of these riskier projects. So, what types of property are not covered? So, you know, all of the insurance policies that we work with will certainly have their exclusions listed in the policy. And these are some common exclusions that are usually listed. So, the first is land. You know, we're looking to cover any field or backfield material that's not covered. Any field or backfield materials that you bring to the project, but anything that was already existing at the job site, we're not looking to cover. As well as property that will not become a part, a permanent part of the building. So, things, furniture, fixtures, you know, some of these contents that go into the building. That being said, there are some endorsements that could be added to cover some of this stuff, or depending on what the fixture is, it can be included in the builder's risk coverage as well. So, a lot of these exclusions do have asterisks next to them because just for just about everyone, there is some type of card back out there to get the coverage. Contractor's equipment is also listed. That's one thing that normally isn't covered under a builder's risk policy, but again, they have endorsements out there as well as contractor's tools, other machinery, some plant and equipment, whether owned, loaned, borrowed, hired, or leased, or property of a similar nature that's not destined to become a permanent part of the insured project are usually excluded in builder's risk coverage. So, also property in transit, we'll come back to that because while that is excluded, normally all builder's risk policies will offer a small coverage extension for property in transit, and that also applies to property at temporary locations as well, which is what I mentioned before when I talked about my manuscript endorsement example. Standing or existing structures, so think renovation projects as opposed to new construction projects where we're constructing something that didn't exist prior. Builder's risk coverage also includes a lot of renovations where we are taking an existing structure and updating that structure or converting it to something else, and so a lot of times the existing structure will be excluded while the building materials that you're putting into the renovation will be covered. There's also plenty of companies that have within their appetite to provide some coverage for the existing structure as well, and that may be on a limited risk basis, meaning that, hey, only if it's damaged by, you know, these listed perils will we cover it, or I've also seen it on an all-risk basis, meaning that as long as whatever happens to the existing structure isn't specifically excluded, then we'll cover that as well, but we will talk deeper into that later on in the presentation, and then also trees, shrubs, or other landscaping that may be initially excluded, but also a very popular or common coverage extension to give coverage for that as well. So just talking coverage extensions in general, so, again, moving away from exclusions, moving on to coverage extensions, which, you know, one thing that we'll see a lot in this presentation is that in the, I'd say, just the general insurance space, there are a lot of things that have multiple names, coverage extensions being one of them. Some policies may reference them as additional coverages. Some may reference them as coverage extensions. Some may reference it as supplemental coverage. But just know that we're all essentially referencing the same thing, and as you see on my slide, the real question is, is the limit provided part of the covered property limit on the declarations or in addition to it? And so that being said, it's important to know that coverage extensions are part of the building property limit, not in addition to it. So while these coverages can increase a partial loss, if you have a full loss, you know, note that the insurance company isn't gonna pay more than the builder's risk limit shown on the policy, whether that includes these extensions or not. So good to know that, but of the coverage extensions or the very common ones, we have building ordinance, debris removal, escalation provision, false work and cribbing, scaffolding, re-erection, and then lastly, temporary storage and transit. And we'll dive into these a little deeper here in the next couple slides, but if you don't know what false work is, all that is temporary structures used in construction to support a permanent structure until its construction is sufficiently advanced to support itself. So again, with the idea that we're only looking to cover things that will be a permanent part of the building, false work would not fall into that definition, and so therefore would be excluded. But again, there's coverage extensions out there that we can add false work coverage to your policy. And then scaffolding, re-erection, if you're not familiar with scaffolding, scaffolding, also called scaffold or staging, is a temporary structure used to support and work crew and materials to aid in the construction, maintenance, and repair of buildings, bridges, and all other human-made structures. So think, again, going back to false work, that's temporary structures used to support a permanent structure until its construction is done, so that's actually supporting the building. Scaffolding supports the people working on the building, but same idea in that these are temporary structures that are not going to become a permanent part of the building, and therefore the coverage will be excluded from most build-at-risk policies, but it's added back via endorsement. So moving on here, taking a deeper dive into the building ordinance coverage extension. And so this coverage is for loss caused by the enforcement or ordinances or laws regulating construction and repair of damaged buildings, which I do have to say, you know, I think certainly in my career and anyone I've ever spoken to that works in the build-at-risk space, I've never seen an ordinance or law loss, but I know this coverage wouldn't exist unless there was at one time a loss. And so just to take a deeper dive into the coverage, there are three different parts, part A, part B, and part C. And so part A addresses the undamaged portion of the building rendered unusable or condemned based on ordinance or law, and you'll have to demolish the building and the coverage for loss and value of undamaged portion of buildings. So if you have a building that, you know, part of the building was damaged, but because of the updated building code or whatnot, you can't just, you know, replace that damaged part of the building. You have to now demolish and rebuild the whole building. Then that's where a cover, or that's where these ordinance and law coverages would come into place. And then you have coverage B, which pays for the cost to demolish the undamaged portion of the building. And last, coverage C, which pays for the increased cost of construction of making the building compliant with current building codes. So that may mean getting more updated wires or getting, you know, a different type of sprinkler system or, you know, getting, again, whatever is needed to get up to speed with the current building. So very common coverage extension that you'll see in just about every builder's risk policy. So debris removal, another very important coverage extension. You know, one thing that you wouldn't think about is that when you have a builder's risk project and some type of loss occurs and causes a lot of physical damage, a charge that you may not think of is the cost of the building. And a charge that you may not think of is the cost to clean up the site and remove that damage so you can start to rebuild. And, you know, this coverage extension is very important because debris removal costs can be so high. And because it's so high, that's why most carriers limit the coverage for debris removal to 25% of the amount paid for a loss. An additional limit, which varies by carrier and is usually adjustable, is available when the expense exceeds 25% of the paid amount or when the combined loss of property and debris removal expense exceeds the limit for the damaged property. So we will jump into our next poll, which is tied to debris removal and will be perfect before we move into our first break. So poll number three, we have a builder's risk policy with a million dollar limit. It also applies a 25% debris removal percentage. The debris removal additional limit being applied to the policy is $100,000. And so we have a loss of $925,000 with a debris removal demand of $500,000. And you may have to pull your calculator out if you're not good at mental math like me. But our question on this poll is how much debris removal will be paid? And I will launch the poll now. Which I'm not sure for the poll if option B is telling you $500,000 or $331,250. But if you are seeing $500,000, it should read $331,250. And we'll give it just a few more seconds here. I'll take out my calculator to make sure I'm doing this right as well. All right, I will go ahead and close and share the responses. So the right answer, which, again, could have been technical difficulties here, but the right answer is B, and it should be $331,250, and I'm getting that by taking the debris removal percentage, 25%, applying that to the loss amount, so 25% of $925,000 gives me $231,250, but the debris removal demand was $500,000, so I'm going to take that 25% and I'm going to add $100,000 to that, which comes from the debris removal additional limit, to get a final answer of B, $331,250. And sorry, the digital poll didn't reflect that. I'm sorry, it didn't have the correct A, B, C, D options, so anyway, it was a good learning point, but I apologize for that digital poll error. Yeah, no, I set you guys up for that one, so apologies on my side as well, but really appreciate you all participating in the poll there. And that being said, I think this is a great time for our first break, so we will take 10 minutes and look to come back at 3.01 Eastern. All right, everyone, I think it's been 10 minutes, so we are going to get back into the Build and First presentation here. Just a reminder, didn't have any questions that first hour, which is no issue at all, but just wanted to remind everyone that we are looking to give out an Amazon gift card to the most engaged attendee, so if you have any interest in that, feel free to ask me any question you have related to builder's risk. So all right, moving on. We were talking about coverage extensions, and so moving on, the next one is escalation. And so what does escalation mean? Escalation is an additional limit, usually reflected as a percentage of the covered property limit available in the event of a total loss. And so the reason why escalation even exists is that within these construction projects that we're insuring, the values fluctuate heavily from sometimes even day to day. And what I mean is that, let's say you have a building that might cost a million dollars. Well, the owner comes on the job site and says, you know what, I want to switch up the light bulbs. I want my light bulbs to look a little different now. Okay, well now those light bulbs cost a little more than the old ones, so now the value of our project has now increased by X amount of dollars, something insignificant, but if a total loss was to happen, again, with the idea that our insurance is supposed to indemnify or make these people whole who have the loss, then it's important that we pay out the full amount of values that are exposed at the project that we agreed to cover. And so as opposed to having to come get an endorsement every single time a value increases, the escalation coverage extension was invented to, you know, you'll see anywhere from 5, 10, even 15% which just says that, hey, you know, if you take the total limit shown for this building's risk policy, we'll actually pay in excess of 5% of that limit or whatever your escalation clause is. So again, that just differs from carrier to carrier. I think it is a value proposition. If you are able to offer a higher escalation clause, you know, as an underwriter, I probably wouldn't want to hire, I would not want to offer a super high escalation clause just because I'd like to see real time and what the values are. So, you know, 5% certainly is the standard. But again, I've seen it as high as 15%, even 20%. And again, the goal is to limit endorsement activity required when increasing those costs. And another good point to touch on is as an underwriter, you know, we have certain referred to as line setting where we have a certain amount of capacity we may want to deploy on a particular project. And so very important to remember the escalation you're offering when you are deploying that capacity as well. Because if you don't take into account your escalation clause and you do end up having a total loss and the escalation clause, you know, may push you past the initial line set that you had or that you intended to offer, and that's just going to cause you drama in your life that you don't want. So certainly would implore everyone, again, to make sure you're reviewing the escalation and make sure you are taking that into account when you are determining how much capacity you're looking to offer on a particular project. So very important. You know, for most underwriters, you don't get in trouble for a lot, but, you know, overlining yourself on projects, meaning offering more capacity than your company may be comfortable with is certainly one of the very few things that can get you in a lot of trouble very easily. So always want to be cognizant of our escalation clauses. So moving on to, again, other coverage extensions, we have our temporary storage and transit. And these coverage extensions, again, are given on a blanket basis to pretty much anywhere in your coverage territory. So each coverage territory should also be defined in the policy. Some folks, it's, or for some companies, it is North America. For some companies, it might be a global thing other than a particular, you know, high-risk countries, but just depends on your coverage form and the underwriting appetite of the company that you are underwriting on behalf of. And so for temporary storage, this, again, it's a location not scheduled on the policy. And this is building materials that are being stored. So if you remember back to our earlier slide where we talked, where we showed the AAIS definition of building materials and basically what we're looking to ensure with the builder's risk policy, it has to fall into that definition and then be at one of these temporary storage locations in order to be covered. That being said, yeah, it is going to be a sublimit on these coverages. You know, normally, you know, it's a small percentage of the total values on the project, but those sublimits are variable, meaning they can be increased or decreased accordingly. And I even mentioned earlier in my presentation about the manuscript endorsement we had to make for a specific temporary storage location. So, yeah, very versatile in regard to, you know, how much limit you're going to give and whatnot. And you'll even have some carrier's wording that may, you know, limit coverage around storage and transit that other companies, you know, don't have. Like some, I've seen some forms that exclude shipments by water to or from Alaska or Hawaii regardless of origin, or I've seen kind of just all ocean marine shipments excluded. So, again, just very important to know your coverage form and know what you're intending to cover. And I didn't really speak much on transit, but kind of stuff that's mandatory. Again, building materials that are in transit, meaning on their way from the supplier of the building material to your job site, those building materials will be covered as well as they are moving around the world to get to you. So, as an underwriter, again, very important to underwrite these coverages as well. And I guess when I say underwrite, I really just mean analyze and make sure that you are aware of certain risks. Certainly want to know the security on these storage places. You know, is it fenced? Is it lighted? Are there any type of security guards, cameras? Because, again, if your building materials are being stored in these temporary storage locations and were to have some type of loss, whether it be fire, theft, whatever, you know, we are covering those losses. And so it's important to have a good idea of the exposure at these locations. And so, again, want to know the security risk, the fire risk. Are you storing these materials in a framed building in the middle of nowhere where it will burn quickly for one and it will take forever for a fire truck to get there? You know, obviously, as an underwriter, we're going to, if that's the temporary storage location, we're probably going to limit our coverage and charge more for it than if they were in a more populated area with a very close fire department in a concrete building that was heavily sprinklered. So, you know, those are two different scenarios. And just as an underwriter, it's very important that we know what risks we are ensuring and making sure that we are contemplating the risk associated and applying whether it be lower limits or no coverage at all, higher deductibles, higher price, doing something to address the risk and doing what we can to help mitigate the risk through our policy. Also, lastly, when it comes to these locations, you certainly want to know the NATCAT exposure on the building. And when I say NATCAT, just referring to a quake, name one storm, flood, convective storm. You know, obviously, if the storage location is in, you know, the middle of a terrible flood zone, then you should probably be charging more than if it was not. Or if it's in, you know, right on the coastal Florida, super high hazard, storm surge, and name the windstorm exposure. And again, these are all things that we just want to be cognizant of, we want to look into, and we want to address through various means as an underwriter. Again, whether it be lower limits, higher deductibles, more rate, or not offering the coverage at all. So other common endorsements onto the insurance policy, and we'll take a deeper dive into these in our next slides, but we do have earthquake coverage, equipment breakdown, flood coverage, loss of rents or loss of rental income, soft costs, and also permission to occupy. And again, going back to kind of the theme of this presentation is always to know your coverage form. It's very important to know the definitions of these endorsements and these terms and how your policy will respond, whether it's earthquake or earth movements or land movements, you know, with the understanding that, you know, land movement being much of a broader coverage versus earthquake having to be tied to some type of seismic event. So if you don't have seismic events, but you still have some type of movement of land, depending on your coverage form, that may not be covered. And, you know, as we look to, I don't know, be a resource as an underwriter with our broker partners, that's something you certainly want to be aware of and make sure if you're underwriting projects in those susceptible areas that, you know, we're all on the same page here from an underwriter, broker, and insured, because the last thing you want to happen is for a huge claim to have to take place and for a huge, I'm sorry, I saw a question and got kind of thrown off there. But the last thing you want to happen is for some type of huge loss to take place that everyone thought was covered, but it actually wasn't covered. You know, we certainly don't want that to happen. And so I was thrown off because a question popped up, which I appreciate the question, Don. Would theft be a covered cause of loss for items in temporary storage? And that answer is yes, which is why it's very important, again, to know what security measures are being put into place at those temporary storage sites. There's a very popular, I guess there's quite a few popular places you can look up crime scores in certain areas. So, yeah, ideally, you know, a place with low crime score, fenced, again, locked, lighted, watchmen, cameras, you know, all things to help deter theft, because if you did have someone come and try to steal some stuff, then, yes, we would eventually be covering that under the Build-A-Frisk policy. So appreciate that question. But getting back to the endorsements, again, I was just saying how it's super important to know your coverage form and know your definitions. Similar with flood, you know, that's a big thing within flood definitions and storm search, part of the flood definition or the named wet storm definition. And depending on your limits and deductibles and whatnot, you know, a flood loss could be adjusted completely differently depending on which coverage storm search would fall under. So, again, just very important. Can't stress enough to really know your coverage form and your definitions and whatnot, especially when it comes to these CAT losses. So moving on to equipment breakdown, and equipment breakdown is just making sure that machinery is operating the way it should be. And within equipment breakdown, another word for equipment breakdown is testing. And so within that, you have what's called hot testing and cold testing. So the difference is that cold testing checks equipment under dry run conditions without applying heat, fuel, feedstock, or connection to a grid or load circuit versus hot testing operates equipment under actual working conditions. And so examples of cold testing could be using instruments to detect a circuit or filling a pressure vessel with water to test for leaks. Normally carriers have very high appetite for that. You know, we're really not too worried about cold testing because it's really not that risky. But hot testing is kind of the opposite end of the spectrum to where it is one of the more riskier parts of the builder's risk project. And examples of hot testing include, you know, testing an engine or a power plant or any manufacturing project where, hey, we're building a car manufacturing plant. It's been a common submission that we've seen as the proliferation of electric vehicles seem to just increase and increase. And so, yeah, you know, they're going to have a lot of hot testing and projects like that where they have to install all this equipment and then we actually have to run a car through this equipment to make sure that it's operating the way it should be. And, you know, while this might be a dramatic example, the last thing we want is for this equipment to be installed incorrectly. And as soon as the fuel is placed into the equipment, you have a huge explosion or some type of fire loss. While, you know, that doesn't happen often, it certainly does happen. And that's why hot testing is considered pretty high hazard for most folks, especially depending on what kind of equipment you're using. So hot testing is usually given in a number of days that are in increments of 30. So, you know, 30, 60, 90, 120, and so forth. I'd say the number of days given usually, you know, changes from company to company and risk appetite to risk appetite. So it just depends on what you all are comfortable with. But some information that I think is really key when you are providing hot testing coverage, you certainly want a schedule of the equipment so you can see, you know, what actually are they going to be installing and testing. So normally they'll have like a description of the equipment as well as the value tied to that piece of equipment. And it's just great to know as an underwriter so you have an idea of, you know, how much values are tied into the equipment here versus the building and therefore hot testing being a, you know, being tied to that equipment is obviously information that would only benefit us. So, yeah, you want the schedule with the description, the value. But another important thing to consider is where the equipment is coming from, especially when you're offering some type of soft cost coverage or delay in completion coverage, which I know we haven't dove deep into the presentation yet in regard to that topic. But when you are offering some type of delay in completion, you certainly want to know where this equipment is coming from because the last thing you want is for a damaged piece of equipment that needs to be replaced to take much longer than what you anticipate to arrive at the job site and therefore just delay the completion of the job, you know, significantly as you wait to have that crucial piece of equipment arrive to the job site. And so, again, I always want to look for where is the equipment coming from. And then you may be able to adjust your waiting period for delay in completion coverage tied to testing based off where that equipment is coming from. So, you know, if it's coming from the U.S. and we have a U.S. project, then, you know, maybe that doesn't really concern me. But if I'm working on a very specialized project and this very specialized equipment, you know, is only manufactured from, you know, one manufacturer in France, and so, therefore, if this equipment was to be damaged, now, you know, we have to wait on this very specialized piece of equipment from France to get all the way to the job site, which now, you know, shipping times aren't terrible, but certainly during the pandemic, we were seeing as the ports were so clogged, which hopefully the infrastructure bill will address, and hopefully we won't see that going forward, but, you know, things were simply just sitting at the ports because they couldn't move fast enough to get building materials in. And so, again, it's, you know, as an underwriter, you just want to be aware of all of this. You know, the last thing you want is for a significant loss to take place, and now they have to replace the equipment, but you didn't know the equipment was coming from so far away, and so now we also are looking on the, you know, in addition to the large physical damage loss, now we have a potentially large delay in completion loss, and so, again, just important to know all of this going into the project so we can try to do what we can to mitigate against these kinds of losses. And then last but not least when it comes to hot testing, we certainly want to know who is overseeing the testing. A lot of times you'll have a general contractor who's overseeing the project who may have some experience with a similar type project of what they're building, but sometimes when it comes to the specialized equipment, they may not be super experienced with that equipment specifically. And so you'll see oftentimes whether it be the owner of the project who does know much more about the equipment or even a representative from the equipment manufacturer themselves will come to the job site to help oversee the testing. The larger point here is that as an underwriter, we just want to make sure that whoever's overseeing the testing knows what they're doing and has experience in what they're doing. So yeah, that's pretty much the end goal there is again, just to make sure that we know whoever's overseeing this is experienced in what they're doing. That being said, again, you know, hot testing is considered pretty high hazard for some companies. And so the appetite around hot testing changes significantly from company to company based on where you're at. So moving on to loss of rent or loss of rental income. So this is intended to cover any loss of rental income incurred due to a delay in completion at the project site. And it's important to know that the delay must be caused by a covered cause of loss. So you'll see the question on the slide says, when will this coverage be important? And you know, you see it most commonly, just think of things that can be rented. So most commonly is going to be multifamily housing. So apartment buildings, condos and whatnot, certainly you will oftentimes see loss of rents being requested, which makes sense. And as an underwriter, you want to get what's called a pro forma. And this is just a document that confirms the actual rental income that is expected from the job site. And I guess just to further explain, you know, how this works. So imagine you are building a, you know, new apartment that is set to open January 1st of 2025. And so you're expected to, you know, start making money off of these apartments, you know, as soon as they open in January. But let's just say, unfortunately, a large fire takes place, you know, in December. And therefore the apartment is unable to open in January. And therefore they're going to miss out on that rental income they would have gotten had the project been completed and delivered on time. And so loss of rent is intended to pick up that exposure subject to a waiting period. And so how it would work is, you know, we would look at the original anticipated date of completion prior to the loss. And then let's say the loss happens, and then the project gets back up going eventually, you know, when they can. We then continue to look at the original anticipated date of completion. Once we get to that date, we then apply whatever delay in completion waiting period applies. And then after the waiting period is up, whatever delay you're still facing, that's when claim payments will start being made. So these loss of rental exposures or losses can be very significant depending on how long a project is delayed. And it kind of goes back to similar to what I said in hot testing. And, you know, just in general as an underwriter, you want to have a good idea of where the materials are being sourced out of. Because if the large fire, going back to my apartment example, does take place in December, you know, hopefully they could clean up pretty quickly, get whatever equipment or building materials replaced pretty quickly. But if you have some type of, you know, ornate interior designs coming from a very specific country across the seas, then that may only delay the project further, which would cause an even higher loss of rental income loss. And so, you know, certainly just want to be aware of all of this as an underwriter. And I'd say tied to loss of rent is also another delay in completion coverage called loss of earnings. Very similar to loss of rents, except loss of earnings just applies to insured who may get their money from other ways that does not include renting anything. So you think of, like, a manufacturing plant. If, you know, you're going to be getting earnings from the things you manufacture from that plant, if you have some type of physical damage loss, so let's go with a fire again. And so now the plant was supposed to open January 1st, 2025, but because of the fire, now the project's being delayed. And now all the January income that would have been made is now not going to be made. And they also have what's called loss of gross earnings coverage, which applies to that as well. So very similar to loss of rents, and you ask for a pro forma to justify the loss of earnings limit being requested as well. The last thing you want to do as an underwriter is just kind of throw out all these limits and have no justification on why the customer actually needs these limits, because then you end up, you know, from a claims perspective, it's just easy to, frankly, you know, be part of an insurance scam or whatnot when you don't have all these things justified. So that's how we want to do that. So moving on to other soft costs, and this will fall under delay in completion, larger bucket as well as opposed to the hard costs in a project. And so I guess just to break that down, you know, hard costs are your physical costs of the actual project. So building materials, labor, profits, things of that nature, where soft costs are costs that only are incurred because a loss took place. And so had it not been for the loss, we don't have to pay these soft costs, whereas, you know, hard costs are going to be part of the project regardless. And so some common categories of soft costs include advertising expenses, you know, think if, again, going back to an apartment example, if you printed out a bunch of ads saying, hey, we have a new apartment complex opening January 1st. We would love for you all to move in. And then you have a loss that pushes the project back. Well, now we have to, you know, reprint all these ads because the move-in date needs to be updated. And had it not been for the loss, then we wouldn't have to do this. And so that's where you get your advertising expense soft costs. And then architect and engineering fees, another common one, you know, depending on how bad the loss is, you may have to get architects and engineers involved in order to even clean up the site and then continue to rebuild. And certainly those engineers will be able to confirm if, like, whatever is left at the site, can we even build on top of that? Or at this point, do we have to demolish the whole thing and rebuild? So, you know, another common soft cost. Audit, bookkeeping fees, you'll see that as well. Insurance premiums for builder's risk. And also another thing I learned recently, which, you know, shout out to the insurance industry, always forever learning, is that, you know, soft costs on our builder's risk policy can also cover insurance premiums for other coverage lines. So while the slide says insurance premiums for builder's risk, casualty insurance premiums can also be included as well because, again, had it not been for the builder's risk loss, we wouldn't have to extend these other coverage lines too. So something to consider. Interest on construction loans, that's another very common soft cost request, especially as these rates seem to get higher. And it seems like we've only seen the request or the amount requested for interest on these loans to just be higher and higher. And same thing with realty taxes, another common soft cost request that we see. Another thing to point out is that because soft costs are tied to a physical damage loss, they are priced higher than the hard costs for the most part. So usually soft cost rates are probably at 150% of your hard cost rate. And again, the idea being that if a loss does happen, pretty common if you have some delayed coverage for a delayed claim to also be triggered. And so because of that heightened exposure, we want to adequately fund for our losses and therefore we charge more for soft costs or charge a higher rate than for our hard costs. So another endorsement permission to occupy, this goes back to knowing your coverage form and how each coverage form may differ in regards to how they view permission to occupy. From, you know, it could be some coverage forms want no occupancy. And some coverage forms may even say once the building becomes occupied and all builder-first coverage ends. So other coverage forms may say we'll give you a number, a certain number of days, maybe 30 days of occupancy within our builder's risk policy before we have to deem the builder's risk coverage expired. I've even seen other endorsements where they might say, hey, we don't consider training staff or employees or other personnel to be considered as occupancy. So while we don't want true occupancy, we'll allow employees to come in and work. So again, it just depends on your coverage form and your underlying appetite of the company that you work with. And, you know, just in my experience, I've always seen an appetite to grant occupancy, but it just really depends on the type of project. So you have a large-frame project, you know, maybe that's one that you want to limit occupancy on, being that, you know, if it's an apartment building and you have people moving in and cooking, obviously the chances for fire is increased significantly versus if it's, you know, maybe an educational building, like a classroom building, maybe you don't really care about occupancy there because, for one, given the occupancy may be a value proposition for you as an underwriter and may actually make your coverage form more attractive to the broker and insured that is choosing, you know, which carrier to be insured by. And so, yeah, if you take a project like a pretty low-hazard classroom building, you know, it's not going to be too high of a chance for a large loss if you have the occupancies actually in the building, assuming that they are just sitting in a classroom and leaving. And so, again, depending on the project, it may depend on, or that may significantly affect your views on if you should offer occupancy or not. But it just depends on each company. So perils, we know what's protected, but what are we protecting it from? Builders' risk is on an all-risk basis, meaning that, or open peril basis, meaning that everything's covered unless we say it's not covered, we meaning the policy. And so that's why it's very important to know your exclusions of the policy. You know, they do, and for the most part, they're all the same within the builders' risk industry, but there are some small exclusions that may differ from company to company. So, again, it's very important to know your coverage form and know what your exclusions are. So some common exclusions include civil authority, which is just when local, state, or federal governments may evacuate or prohibit access to certain areas, such as after a natural disaster occurs. You know, since we do cover physical damage only from a covered peril, this shouldn't really have a huge effect on our projects, but that is a very common exclusion in most builders' risk policies. Consequential loss, too. And what consequential loss is is that most builders' risk policies exclude consequential loss, which are indirect losses that arise from the occurrence of a direct loss. However, some covered expenses can be added to the policy to cover such losses, i.e. degree removal, that being an example of a consequential loss that will be covered, expediting expenses, demolition and increased cost of construction, et cetera. But some other common exclusions, dishonesty, that's going to be excluded if you commit some type of act of fraud, earth movements, faulty work and flood. You'll see some asterisks there because while it may be commonly excluded, you can always add it back via endorsement. So we already talked about kind of earth movement, earthquake, that thing. But faulty work, you'll hear what's referred to as leg one, two and three. And just to keep it super simple, leg one excludes both faulty work and the ensuing loss from the faulty work. Leg two would exclude the faulty work itself but provide coverage for the ensuing loss from the faulty work. And then leg three is the most liberal coverage for the faulty work itself and the ensuing loss of the faulty work. So again, depending on the appetite of your company and as well as the type of project that you're working on, whether you're offering leg one, two or three, that may change. But again, just depends on your underwriting appetite. But very common these days to be asked for leg three, which again is the most liberal of the faulty work wording in builder's risk policies. It almost seems to be quite the standard these days. But again, just depends on your underwriting appetite. So governmental action, insects, vermin, animals, more common exclusions, which you would be surprised at how much damage some insects, vermin and animals can cost. I remember years ago reading through some builder's risk loss runs and I think it was some type of data center or it was some project with a ton of wires involved. I remember how I saw that vermin or rodents got in there and kind of just destroyed all these wires and it ended up costing around, I think $8 million for that loss. And I just would have never thought that animals could cause that much damage, but I guess they certainly can. And so a lot of times that will be excluded from builder's risk policies, but I haven't even seen endorsements to where you can even add some coverage for that back as well. Mechanical breakdown, we just talked about that in equipment breakdown or again, cold testing, hot testing. And then nuclear hazard, war, wear and tear, those are exclusions that you're gonna always see and I've never seen an endorsement where you can get stuff like that covered except there is a government terrorism program in place that I'm sure most of us on the call have at least heard of or are familiar with. And so if it is some type of act of terror, there's insurance for that, but it wouldn't fall within our builder's risk coverage. So all good things must come to an end. We talked about when the builder's risk policy should start, which again, in my opinion, is when items that we're insuring actually arrives at the job site. But we need to talk about when things come to an end. And so this is the wording from the AAIS IM 7050 form, which again, depending on which coverage form you use, your wording may be different from this, but this simply reads, when coverage ceases, coverage will end when one of the following first occurs. A, this policy expires or is canceled. B, covered buildings or structures are accepted by the purchaser. C, your insurable interest in the covered property ceases. D, you abandon construction with no intent to complete it. Or E, covered buildings or structures have been completed for more than 90 days. And so again, just really important to know your coverage form and know where your company intends to stop builder's risk coverage. Some wording that may include final completion. And I gotta say, that's probably the most liberal wording I've seen because you don't have to worry about substantial completion or occupancy or things of that nature. But again, the main point here just being that depending on your coverage form, some coverage forms may cause some builder's risk policies to end before others. And so very important to know that. And also it's great to know what the builder's risk contract in place is intent, or I guess the contractor's contract that they have with the owner. What the intent of that is when it comes to when can we turn this project over to the owner? You know, I've seen some projects where the contract unfortunately made it very clear that until every single aspect of this project is complete down to the landscaping, then you cannot turn any of this project over to us as the owner to cover and insure ourselves. And so you end up having, you know, these builder's risk policy be extended a couple of times simply because they are looking to finish some landscaping, but like make sure the bushes look good before they turn over all these values, which is tough as a builder's risk underwriter, because again, our deductibles and rates are not really intended to have the full completed value of these projects exposed for a long period of time. So again, just good as an underwriter to kind of go into it from the get-go, kind of knowing how these projects work with these contracts and I've certainly seen, it seems like a lot of municipality or government work that happens. Those contracts seem to be the toughest when it comes to keeping builder's risk coverage as long as possible before they switch it over to operational. So just something else to look at in your coverage form. Valuation, so this is another important piece within a builder's risk policy, and I think that will start our next poll, which it reads most builder's risk policies are valued at what? A, actual cash value, B, replacement cost, yeah, replacement cost valuation, C, functional value, or D, stated value. And I will open the poll now and give you all a minute or two to answer. All right, while you all finish up the poll here, we did get another question coming from Julie Hart, and her question is, did you say that Leg 3 has become the standard? I haven't seen that yet with only an agent or two requesting it. Great question, Julie, and thanks for your participation. But yes, I did say that Leg 3 has become the standard, and I kind of said that in a tongue-in-cheek way, but I work on only large Builders First projects, so these are projects over $100 billion in completed value, and just speaking in that space, or just speaking in that space of what I've seen, the Leg 3 request seems to be on almost everything. Now, is it given on everything? No, but I, in my experience, I would say that it's, on these large projects, it's more often times given than it is not given. I would say on heavy civil projects, though, you know, that Leg 3 is not ever given, but on large manufacturing jobs, I've seen large hospital jobs, large college campus jobs, that yeah, it's seeming to become pretty, pretty common, so I hope that answers your question, and then I will move back to the poll, and let's close this poll and share the results. So most people went with RCV, with ACV being second place, and I would say I've seen a little bit of both, to be honest, y'all, and it just depends on your coverage form. I've seen some coverage forms straight up say actual cash valuation. I've seen other say replacement costs, and I've seen a mix of both, so again, just depends on your coverage form and what your company is offering, so very important to be familiar with that. All right, so moving on to how to underwrite, and I think we are coming on our next break quickly here, but I will get through just a couple of slides before this last break. So I wanted to start with just what should we be looking for in a builder's risk submission, and so these are kind of in an ideal situation, which I'm sure underwriters on the call can speak to maybe not getting full submissions all the time, but in an ideal situation, this is all the information that we would get in a submission, so you get the builder's risk application along with the schedule and budget, as well as any site plan or project drawings. We can see the geotech reports, the hot work program, which kind of just goes through how hot work is mitigated on the job site, as well as water mitigation plan, as water losses are the number one loss leader in the industry, while water mitigation plans, you know, maybe a decade ago, most underwriters were not asking for that. Now it is starting to become more commonplace, again, in an effort to address all the water losses that we see. Let's see here. Aileen, can you confirm you can see my slides? I was shown in a question that my slides might be frozen. I'm sorry. I'm sorry. So, I see the poll results. Yeah. Oh, okay. Oh, let me go to hide. Sorry. Here we go. Okay. You're full technology today. You're one of the few instructors that do it. So, thank you, Cody. No, no worries. And thanks for that note, Julie. Let me know that the slide was still frozen. So, okay. We're on required submission docs. And, again, I was just running through what we ideally would want to see in a builder's risk submission. I was at hot work program, which just talks about the different mitigation steps being in place to help mitigate against fire losses caused from hot work. And then water mitigation plan, which while is maybe not the standard for every single project, it's starting to become more commonplace as we start to see a lot more significant water losses. Again, can't stress enough, water loss is the loss leader in our industry. So, we certainly want to know what is happening around water. And then, lastly, hurricane emergency preparedness plan. But that does apply to projects that would be within high hazard hurricane zones. Obviously, if you have a project in Ohio or the Midwest, you know, you probably wouldn't ask for a hurricane emergency preparedness plan. Another question you may have is why not an earthquake preparedness plan? And the difference there is that, you know, you can't really prepare for an earthquake. Those things are unpredictable and just happen out of nowhere. But with a hurricane, it's the opposite. You have plenty, well, I guess plenty of time. That's subjective. But you certainly have time to where you can predict, you know, when it's a tropical storm, you can see the path days before. And so, it is a catastrophe you can actually prepare for as opposed to an earthquake. So, just going to run through the builder's risk application here before we take our next break. So, this is some of the basic info you would hope to get in a builder's risk application. But it should just be a good snapshot of what are, what is the broker requesting me to ensure and what kind of limits are they requesting for me to provide. And so, you would hope in a builder's risk application, you would get a detailed project description, including the construction timeline, the construction type and square footage. That obviously is extremely important because, as you'll see in the next few slides, different construction types have inherently different levels of risk. And it's important as an underwriter that we are in an effort to adequately fund for losses, that we are charging the appropriate amount for the different construction types. You also want to know the ultimate or intended occupancy. So, when this project is complete, what will it be? Is it going to be an office building or is it going to be a large data center or is it going to be a water treatment plant? Obviously, it's good to know that so you can look out for certain exposures that you know are tied to certain types of projects. And then also, a lot of carriers may have different endorsements that must be used when certain occupancies are being built. So, very important to obviously know what are we building and what are we ensuring. Then the GC background and experience should hopefully be listed on the application or at the very least just a confirmation of who the GC is as well as their website because luckily in today's age, just about every respectable GC has a website that you should be able to go on and you can see how long they've been in business. You can see where they operate out of. You can see what type of projects they're building because again, no matter whose name the builder's risk insurance is under, it's the contractor that's going to be overseeing the actual construction operations. And therefore, they are going to be the ones solely responsible for our loss. And so, you know, insurance does exist for a reason and there are certainly some losses that you just can't plan for. And as an underwriter, you have to accept that it's kind of a gamble every time of whether a loss is going to happen or not. But that being said, there are some losses, collapse being one of those losses, that solely speaks to the GC's work. And so, like a collapse is something that is completely avoidable and if the GC and engineers are working together, then we should be able to prevent that loss. But when you look at the GC's experience, it's losses like those, those preventable losses that you might expect to see on GCs that maybe haven't been around as long or just aren't quite as experienced in a particular business sector. That's one thing that we saw during the pandemic. You saw, you know, contractors who, you know, maybe only build in one particular area go to another part of the country to build. And so, now you're building in a, you know, you're normally building in Arizona where named windstorm isn't a main concern where now you're taking on projects in South Houston, which is a hotbed for named windstorm and flood. Have you ever built in this area before? Do you know how to mitigate against named windstorms? So, you'll see that or you'll see people who build in completely different sectors of, okay, you have this contractor that has only built, you know, educational projects, office buildings, kind of typical four-wall construction and now you see them being tapped to build some type of large manufacturing facility in which they don't have much experience in. So, websites are really good at discovering or looking into the background of these GCs and what regions they operate in and what kind of projects that they have experience in. And so, again, can't stress enough how important it is to really be familiar with the GC's experience. And then lastly on the app, you're looking at the architect or engineer background and experience. That's usually included on the app as well and similar to the GC. While the GC is the one on the job site actually building, so I would argue that that's probably the most important experience to have or to be familiar with, you know, they're also working hand in hand with architects and engineers who have given them plans on how to build. And so, if those are bad plans given to the contractor, then it's only a matter of time before a loss takes place. And while, you know, as an underwriter, we are, at the end of the day, insurance professionals trying to learn construction. Like, obviously, I'm no engineer, so, you know, I'm not going to dig through the engineers' plans and tell them why they're wrong. At the very least, we can look at the websites of these entities to confirm how long they've been in business. You know, obviously, if they've been in business forever, then that has to speak to some type of consistency in work that they provide. And so, it's just important as an underwriter to try to get a good understanding of all parties involved to make sure that they are experienced. And that being said, we are right at the 10-minute mark. So, I think this is a great place to have our last break. And I will circle back with everyone at 4. So, see you in 10 minutes. All right, everybody. It looks like it is 4 Eastern. And now we are on our final stretch through this Intro to Builder's Risk presentation. I really appreciate you all sticking with me. I know it's getting late, but hopefully you all are getting something out of the presentation here. And so, we were talking about Builder's Risk submissions, just going through the application here. And I wanted to go from talking about the application with a focus on construction type that should be shown in the application. I wanted to quickly run through the construction types. This is just a cool chart that shows the fire exposure as you move from fire resistant construction to frame. So, obviously, the closer you get to frame, the higher chances of severe fire loss on that type of project, just because the building material being more susceptible to burning. Oh, I guess this chart also shows why, from a capacity standpoint and from a risk appetite standpoint, as you get closer to frame, are most people, most companies' capacity and underwriting appetite gets more limited as you get to frame. There may be some folks on the call that still offer Builder's Risk coverage for frame projects, but I wouldn't be surprised if a significant amount of underwriters on the call don't even entertain frame risks. But, again, it just depends on the underwriting appetite of your company. So, starting with frame, also referred to as ISO Class 1. So, ISO has named these construction types as well. And so, again, in what seems to be an effort to confuse you, they are referred to as ISO Class 1, 2, 3, 4, 5, and 6, but frame is ISO Class 1. So, it's pretty sub-planetary, just wood throughout the whole building from the roof to the walls to the rafters and whatnot. So, obviously, very susceptible to fire. But a very popular construction type, especially on smaller projects or larger multifamily apartment-type projects. It's cheaper to build with than your more fire-resistive materials. So, moving on from frame, you got joists and masonry, which is, I think, a combination of both non-combustible materials and combustible materials. So, while the floors and roof are combustible construction, the walls are brick, stone, hollow block, et cetera. So, more of a mixed construction type, still very susceptible to fire, but not as susceptible as frame. So, usually, the more you get away from frame, again, the more capacity that is out there in the builder's risk industry. Then from joists and masonry, you got non-combustible or ISO Class 3. So, these are completely metal buildings from the roof to the walls to everything. Think of, like, an industrial-type looking building. So, a lot of warehouses or other industrial-type buildings, it's common to have this construction type. Again, great for fire, but I will say, from a wind perspective, these do get – they are wind-exposed. You know, you get a gust of wind within one of those walls, and you'd be surprised at how easy some of those walls may end up falling over. But from a fire standpoint, much more favorable than frame construction. Then after that, you got ISO Class 3, which is masonry non-combustible. So, even more non-combustible materials being used, steel bar joists, steel beams, steel columns, steel non-combustible roof or slow-burn roof, while you also have the same brick, stone, hollow concrete block or concrete tilt wall on the walls. So, again, also much more favorable from a fire perspective than frame. I guess on some of these tilt wall constructions, which all that means is, like, you construct the full wall at once, and then you just tilt the whole wall up against the building to make the four walls. You know, there is some exposure there. And, again, when it comes to wind, sometimes it can blow. Granted, it has to be a very, very strong gust of wind, but I have seen where it will blow one of those sides of the walls down. So, just something to consider. But from a fire standpoint, this is kind of certainly what you want as an insurance carrier if your goal is to stay away from fire-susceptible projects. And then last, you got ISO Class 5 and 6, which is your modified fire-resistive and your fire-resistive buildings. So, this is precast concrete tilt wall or any 4-inch or greater thickness on the walls, steel beams and columns protected with metal lath and plaster or sprayed or fireproofing with a minimum one-hour resistance. And, you know, very similar to the fire-resistive construction type as well, which, again, your 4-inch thick cast walls, your 4-inch thick concrete roof. Exterior skin could be combustible, masonry or noncombustible, but they're all slow burning. So, again, just much more less susceptible to fire than wood frame. And, again, most insurance carriers have an appetite to write these types of projects all day. So, going back to the way the different – or the different names for the same thing. So, in addition to, you know, your frame, geosymmetry, those names, in addition to the ISO classifications, you also have what's called the IBC, which is the International Building Code. They are a governing body in which pretty much all – or it's viewed as a standard within construction. So, they have their names for these construction classes as well. So, you'll see the IBC names on the top, starting with 1A, 1B, 2A, and going all the way to the right. And so, again, I guess the greater point here is that some of these things may be referenced by different names, but we're all talking about the same thing. So, whether it's frame or ISO class 1 or, you know, IBC type 5A and 5B, it's all frame. So, I just want to point that out to you so no one gets confused. And then this is just a good chart that sums up everything we've been talking about from a fire susceptibility aspect for each construction type. So, just a cool little chart there that kind of sums up everything. So, moving on back to the submission docs, you also want to get a construction schedule. And this is an example of what a construction schedule. And this is an example of what a construction schedule looks like. This was a hotel project in which they were renovating a hotel. And you'll see the milestones on the left, followed by the timeline on the right. And this is also referred to as a Gantt chart, but very standard in a construction space. And what we should be asking with every submission, this just simply justifies the policy term being requested. Because the last thing you want to do is to be covering a job site, and there be no work happening at all. And so if something were to happen, you could potentially be on the hook to cover something that you never intended to cover. And so again, you're just looking at these milestone dates, as well as the timeline, to confirm the term being requested. It's also a big deal when you are asked to extend coverage. So oftentimes, with these projects, they will have an original anticipated completion date going into the project. But because of a myriad of things that could be change orders, meaning that someone decided that, hey, we had the original construction to look this way, but we actually changed our minds and wanted to look another way. Or it could be a hard time getting materials to the site. It could be quite a few number of reasons why a project would need to be extended and now have a new anticipated completion date. But whenever you do get that request, which we'll talk further into the presentation about, certainly want to get the updated construction schedule to confirm that new expiration date. And so even on the milestones here, you'll see that mobilization started. You'll see those ID numbers on the left. Number five says mobilization. And so if you go off the schedule, then that's kind of where I would start rating from a policy standpoint. And then you'll see substantial completion. At the bottom, number 17, shown as February 2, 2026. And then it's cut off, but the very last box is supposed to be final completion, which was shown as February 9 of 2026. And so when I'm getting the initial request for a policy term, based off this schedule, the requested expiration date should at least be February the 9th. If I saw anything before that, I would have to ask why are we getting an expiration date that is sooner than what the schedule shows. I certainly don't want to have to deal with working up an extension when we know we could just make the policy term match the schedule. So just get to know that. And then on the flip side, if, let's say, the requested expiration date was December 1 of 2026, but the final completion date on the schedule is shown as February 2, then that's certainly also another question I would be asking of why is the schedule saying one thing, but I'm requested to do something else. And so we just kind of want all these documents to justify the request that's being asked. So this is an example of a construction budget. This simply just takes the hard costs being requested and breaks it down so that we know what's what, so we know that you didn't just create the hard cost number out of thin air. You can actually substantiate, OK, how are we getting to $108 million in this particular project? So just, again, another necessity of any builders for submission to justify the numbers being requested. Again, we don't want to have any type of drama when it comes to paying a claim. And so having this up front only makes everything easier when it comes to adjusting the claim. The site plan, this is an example of a site plan, just kind of shows the job site in totality compared to existing streets and whatnot that's already in place at the job site. And so this project was a new data center. You'll see the gray building in the middle was an existing data center. And they were building another data center very close to it. You'll see that the site plan shows a parking lot, and streets, and roads, which is good to see. Because sometimes when it comes to underwriting for flood risks, you may see where your job site may be at the intersection of different flood zones. And having this site plan, we can actually look at, OK, where does the flood zone intersect within our job site? And is it part of the job site where we really care? But at the very least, we could get more information as an underwriter in order to make more informed decisions. That being said, in my opinion, speaking on flood and intersection of flood zones, these flood losses show that the flood doesn't care where the high hazard zone border is compared to the non-high hazard zone. I've seen a flood go right over that border and flood the low hazard area too. But it certainly helps us make the best informed decisions we can when it comes to issuing capacity, deductibles, rates, and whatnot. The only thing that I would critique this site plan for is that I don't see a lay down yard being shown. And a lay down yard is the part of the job site that materials are stored in when they're received or when they're about to be installed or made part of the project. And so again, going back to flood risk, you certainly want to know where that lay down yard is and where it is compared to any nearby flood zones. Because the last thing you want is for the lay down yard to be completely flooded. And you detect a significant loss because of that. And even if the lay down yard is in a high hazard flood zone, then as an underwriter, you would at least know to apply some type of higher deductible and to charge appropriately for it. So the geotech report is something else that you would certainly want to ask for. And all a geotech report is is that it's a detailed document that evaluates the subsurface conditions of a site, including the soil and rock properties to inform construction and engineering decisions. So depending on where you're building at in the country, you're going to have different soils that can support different types of buildings, structures, and foundations. And so you'll have these engineers that'll go out, or these geotech engineers that'll go out to the job site. They do what's called a bore, where they'll dig into the ground very deep. And they'll see what's there. And then based off what they find, they'll make recommendations when it comes to the building practices that should be implemented on the job site. So it's very important to know these things because the foundation type of the building you're insuring is going to differ depending on the soil ability that the job site is at. And so it's normally a very common subjectivity for most building risk policies that the job has to be built in confirmation of the, or in accordance to the recommendations listed in the geotech report. Because again, the geotech report will say, hey, because it's this type of soil, you should be using this type of foundation. And the last thing we want is for a contractor to say, oh, well, I'm going to do what I want to do and make my own foundation. Obviously, unless you are seeking to pay out losses, that's not a project you would want to take on. And so very important to review the geotech report, know the exposures, look at the recommendations listed in the report, and then confirm with the broker that these recommendations are actually being implemented on the job site. Another cool thing that the geotech report normally speaks to is the water table. And so seeing how far down, you know, we see projects all the time where they are building below grade. But depending on where you are in the country, that may be an inherent water damage risk. And so the geotech report will be able to speak to that as an underwriter to say, hey, you know, the chance for the need of dewatering is pretty high here. So just be aware going into this project that you have to have certainly some type of dewatering plan because it's not a matter of if you'll hit water, it's when. And so again, going back to that, you know, as an underwriter, we're just insurance professionals learning construction. And you know, we certainly don't have the engineering background to be able to look at these parts of the country and know the soils and how deep the water table is and whatnot. It's very helpful to have a geotechnical report that we can kind of just review and kind of learn these very important things from the report. So certainly want to always ask for a geotech report. So hot work program, this is an example of what a hot work program may look like. All a hot work program does, like I mentioned before, is that it just helps set the processes and procedures around hot work. And so you'll see in the top left there that this program, it lists what kind of hot work it applies to, which it's intended to apply to all hot work. But if you're not familiar, hot work may include cutting, burning, welding, brazing, heating, soldering, grinding. And so these programs usually designate who can issue a permit. And a permit is usually just a piece of paper that says, hey, I, whatever type of worker I am on this site, I have been given the green light to now participate in hot work or do things that could eventually cause a fire. And so it's very important to use permits because you want to have a good understanding of who is doing hot work and when they're doing it. And these programs also define areas where hot work can be performed. Normally it's not just anywhere in the job site. It's usually a particular area of the job site where you do the hot work at. It may also speak to the requirement around fire extinguishing equipment and where it needs to be made available at. And lastly, it also usually speaks towards a fire watch, which is maintained usually at least 30 minutes after hot work is completed. So you want to do that because sometimes these sparks that are coming from the hot work, although you can't see it, they may land in places that you didn't see and that a fire may not materialize for quite some time. I've heard stories of that in the past where welders who were working deep into a building had to go inside of a wall and weld something. And they thought that everything was fine. But two hours later, this one little spark that landed somewhere that you would have never thought ended up starting a fire. And so that's the whole purpose of a fire watch is just to hang out for a designated amount of time after hot work ends to make sure no fire is going to occur. So certainly, hot work takes place on every builder's risk project. But for a frame project, you certainly want to have the hot work program just because everything is so susceptible to fire. So water mitigation plan, excuse the redactments I had to make on this one as they had specific names listed and I just didn't want to. Although they gave me the green light to use it, they asked if I could just mark out their name. But water mitigation plans, like I mentioned before, not as common as hot work plans. We're at the point in the industry where everybody has a hot work program. But water mitigation plans, it seems like the contractors that have had terrible water mitigation losses, they have the water mitigation plans now. But it's not something you see super common. At the very least, though, I will say it's more common to have project-specific water mitigation plans. So that is even better because it actually speaks to the specifics of the project that you're looking to ensure. But again, this is a plan that we would love to see because water mitigation or water losses are the loss leader in the industry. And you would love to see water being addressed in a pre-planning phase as well as during the project. I like how this one at the bottom in letter C, it talks about the delivery and storage of construction materials susceptible to water. And so while if you read this plan, I don't think anything groundbreaking is happening. I think the greater point is just that this contractor is showing that we are aware of water losses being an issue. And here's what we are doing to try to simply address some of these issues that could be avoided. You'll see in project activities, I think that's number three, how a waterproofing consultant was hired. And so things like that are showing that they're going above and beyond to try to make sure that water damage losses aren't happening, which is truly all you can ask for. And then on this slide, they address both the pre-dry-in, so this is before the building is completely sealed, versus the post-dry-in, which, OK, what are we going to do now to prevent water damage losses after the post-dry-in? And so just very great to see contractors be proactive about some of this stuff, because again, just having one water leak at the wrong time, like if you have it right before the project is turned over to the owner, where you have total values exposed and you have a lot of susceptible equipment exposed, one water damage loss could be millions and millions and millions of dollars. So certainly want to do what we can to prevent any of those. Then moving on to the Hurricane Emergency Preparedness Plan, often abbreviated as a HEAP. Again, this is just to address any type of losses that can be mitigated from a named windstorm approaching. The duty of hurricanes is that you do get quite a heads up before they come. And I like how, for this one, under purpose, they talk about their past experience and how their greatest mistake was not starting soon enough to prepare for an expected storm, as they found that only 2 thirds of the workforce showed up on the last day or two prior to a storm. Which makes perfect sense, as those workers have their own families to tend to, but maybe something you would never think of as you come up with these plans. So certainly want to move quick, but I like how the plan addresses responsibilities and who's responsible for what. Talks about building, trailer protection, equipment, basically want to tie things down or get things out of the path of the storm if possible. And so again, as underwriters, as we get these requests to put up significant named windstorm capacity in these named windstorm prone areas, if the contractor doesn't have a hurricane emergency preparedness plan, I certainly would be weary of offering such high capacity on some of these projects. So something else to look out for. So after reviewing the submission docs, you obviously want to underwrite the project site. Again, going back to hot work, is smoking allowed, housekeeping, some of these kind of more maybe common losses that you would think about. And these are normally addressed in the general contractors, just their general safety plan, which is normally standard for every contractor. But yeah, flammable liquids obviously ideally stored outside of the structure and a flammable liquid cabinet. Similar with compressed gases and gas to refuel equipment. So kind of common sense things, but you'd be surprised at how many insurers maybe don't adhere to that. So more on fire, you also want to get information about the sprinklers. Although, again, realizing that the sprinklers won't be operational until towards the end of the project, you still want to make sure that they're there, especially for frame projects, fire smoke alarms. Another type of alarm that's becoming more common is water mitigation devices. Granted, they are expensive, but compared to the amount of a builder's risk loss, it's certainly cheap compared to millions and millions of dollars. But we're starting to see as technology grows, more technology being used in builder's risk projects, which is great to see. Public fire protection just references the public protection class of where the job site is. So that speaks to how close are fire departments to you, which is directly tied to how quickly a fire department can get there in the event of a fire. Protection classes go from 1 to 10, with 10 being the most unfavorable, meaning that you're in the middle of nowhere with no fire department near you, to protection class 1, which is a very urban area with a fire department very close. And so depending on where you work and your underwriting appetite, it may change if you're working on projects in protection class 10 versus protection class 1. Same thing with pre-planning and hydrants, as well as accessibility to the building. If a fire truck can't even assess the building, then what good is it having a fire department super close? So one thing you want to take note of as you underwrite these projects. And to talk about pre-planning specifically, we've seen a lot of battery energy storage projects or best projects, as we see the rise of electric vehicles and, you know, the need of a lot of batteries to be put in those vehicles. But to make a long story short, you know, there's certain ways that fire departments have to attack those fires in order to not make them worse. And so I've seen on those projects where the contractor may even work with the fire department of the city to make sure that we're all on the same page. In the event of a fire, the fire department actually knows how to respond to not make things worse, as opposed to, you know, not being trained and showing up and potentially making things worse. So pre-planning meetings are always great to see as an underwriter as well. So from a theft and vandalism standpoint, which these things will also be included on the app, on the application, it's called protective safeguards that they may be implementing on the job site. You know, fencing, locked gates, limited side access is always ideal. Alarms, cameras, just-in-time material delivery, which means that materials are delivered right before they are being installed, as opposed to maybe delivered months and months in advance of when they're being needed. So you have this material just kind of sitting on the job site. So yeah, that certainly helps from a theft standpoint as well. Any type of lights, you know, things that are well-lit seem to have less criminals. And then a watchman is expensive, but you do see that as well. So that's really like the super ideal situation if you're having someone patrolling the site during non-working hours to make sure folks who aren't supposed to be there are not there. So then we also have to do a CAT analysis, which is just referring to natural catastrophes, another super significant source of losses within the builder's risk space. Starting with flood, most folks use FEMA flood maps to address a job site, but that being said, there are also other flood mapping tools out there that folks use that some may argue is more accurate than FEMA, but FEMA seems to be the most common. And, you know, it starts from, you know, your lower hazard zones all the way to your upper hazard AAEV zones. And so this is just a screenshot of the city of Miami and you'll see a lot of high hazard flood around there, which is not surprising to anyone that's ever underwritten a builder's risk project in Southern Florida, but obviously, the higher the flood risk, then generally speaking, the less capacity is gonna be available and the more expensive it is and much more high deductible will be applied. Moving on to earth movement, certainly affects us more in the western parts of the country than the east, but we do have a little bit of quick exposure in the southeast and whatnot, but certainly much more of a western thing, which we all know California is the most highest hazard of quake, as I've been reading that they are overdue for a large earthquake for quite a while now. So I pray that earthquake never happens, but certainly possible. And so we obviously want to, as underwriters, just be aware of the earthquake hazard and make sure we're charging accordingly for it. And then going to the opposite side of the country, named windstorm, as I just talked about, hurricane emergency preparedness. So obviously, named windstorm being a big deal as well. You'll see the different zones. You know, obviously, the more coastal you get, the more hazardous it becomes, especially in Southern Florida and the Gulf States. One unfortunate thing is that it seems like the, or based off the experts, they say that based off the data, it seems like for, as far as named storms, both the frequency and severity is only going to increase, which, you know, in the insurance game doesn't, doesn't put a smile on my face, but at least it's good to know as an underwriter that, you know, these named windstorms have been, they're not going anywhere. They're probably only getting worse. And so very important from an underwriting appetite standpoint that, you know, we're, I guess, employing the strategies around some of these tougher risks that our companies want us to. And lastly, convective storm, which seems to, the area of convective storm seems to only grow where it used to be just kind of a Midwestern states thing. It certainly is, gets in, looks like it's pushing towards Southern Texas more and more and pushing more towards the Southeast. So yeah, convective storm, just referring to straight line winds. So just super strong wind gusts, as well as tornado and hail events, starting to see much more of an uptick in those events. And so, you know, before maybe 10 years ago, a convective storm separate higher deductible, maybe wasn't super common versus now, if you're building in any of these tornado exposed areas, it's normally going to be even a percentage deductible now, which maybe before it was no deductible or just a flat deductible. So another thing to be cognizant of as we underwrite our projects. So moving on to interesting requests, extensions, a very common request in the builder's risk space. So again, you have a original anticipated data completion that because of whatever reason, we are now need more time to finish. So now the broker will reach out for what's called an extension to extend the builder's risk policy. And while most companies certainly have an appetite to extend, there's a lot of info you wanna get before you price up and offer the extension. You certainly wanna know why was the project delayed? Was it a bad loss? Did the GC just quit and abandoned the project and now we have a new GC? Could be, you know, anything. It could be a myriad of answers there, but depending on the answer, that may affect your underwriting on the terms that you offer on your extension. Has anything materially changed about the exposure? Like when you started, it was a two-story building. Now it's a four-story building. You know, that's a big material change that may cause you to change some of your terms and conditions. How much work remains? That helps us know, you know, how much of an extension do you really need here? Any losses? Obviously, if it's been bad losses, you may wanna alter a deductible, charge more for your extension, or not offer an extension at all. And then what type of work remains also very important to know. Usually a program at a premium extension is used. A lot of carriers will have language saying, hey, you know, as long as it's not a loss for 60 days or whatever, we can extend without charging you any extra, but that just differs from carrier to carrier. And again, usually insurance carriers always grant the extension, although we are under no obligation to. It's a big relationship-driven business, and so usually for sake of saving the relationship, extensions are offered, but I've certainly seen a lot of times, especially on frame projects, where maybe because of the reinsurance treaty in place or other reasons, you know, you can only extend a project for so long. And that's a terrible position for an insurance broker to be in, because if you have to go get a new insurance carrier, usually that new carrier is gonna write back to Inception so they can adequately fund for any loss they are now taking on. And so you'll have those circumstances where insurance ends up double paying for insurance. But unfortunately, that's kind of just the name of the game and happens sometimes, but for the most part, we generally do offer extensions. Can you increase the limit? Normally you can, but you also have to consider how you price the increase, with a long story short being that you just wanna take it all the way back to Inception, because remember, our build-up risk rates are contemplative of the build-up factor of starting from zero, ending with full values exposed, and so you can't come in the middle and say, hey, we're just gonna hold off on reporting all these values for the equipment installation until the middle of the project in an effort to save money. If you do that, most companies, if not all, are gonna write back to Inception, again, to help adequately fund for losses. So something to consider as you get requests to increase limits, and also you wanna ask for an updated construction budget to justify the limit increase and to prove that the limit increase truly is needed. Another interesting request is can you do a renovation with existing structure coverage? I mentioned before in the presentation that normally, or that sometimes existing structure coverage is excluded, but you can also add it back via endorsement. And just some info you may wanna get before you make a decision whether to cover the existing structure or not is, is the building currently damaged? You know, if it's pretty damaged, it's gonna be a tough ask to cover that. Any previous losses to the structure, again, just speaks to the condition of the structure. Occupancy change. During COVID, you saw a lot of commercial space not being used, and so you, therefore, saw a lot of offices being converted into habitational or, like, multifamily condos, apartments, things like that. And that really brings on a increased level of exposure, because if you're taking a office building that might've had, you know, one bathroom on every floor, and now you're changing it to apartments, which is gonna have multiple sinks and bathrooms in every unit, and with the context being that water damage is the lost leader in the industry, you know, from a water damage standpoint, then that may, it may cause you some angst, or, you know, you may consider not covering the existing structure just because of that exposure. But at the same time, some companies are fine with it. So it just depends on your comfortability around some of these topics when it comes to occupancy changes. And so we got another question. What percentage of carriers will cover the existing structure? I see that request 25% of the time, but just curious, industry standard of carriers providing existing structure coverage. And it's another question from Julie. Thanks for the question, Julie. Great question. You know, it's hard to give an exact percentage of how many carriers are offering the existing structure coverage, but I would venture to say at least 75%, probably, just based off what I've seen in the marketplace. Again, they may have a very small appetite for existing structure coverage. So they may say, hey, it has to be built within the last, you know, 40 years, or at least updated within the last 40 years. It can't be on the historical registry. You have to provide photos of this existing structure to show its condition. You have to provide a property condition report to show its condition. So it's all kind of circumstantial. But for the most part, if all the boxes are checked, then most carriers have an appetite to offer some sort of existing structure coverage. So some other things to consider is dates of last upgrades to major systems, which I just mentioned. How is the existing building valued? You know, they usually have reports they can provide that shows that. And then, again, referring to the National Register of Historical Landmarks. Some folks may not have an appetite to cover those as there's various tax credits and whatnot associated with those type of buildings that other buildings don't have. So there is some company to company. And, okay, I just wanted to end our presentation on just giving kind of a current state of the market of where are we now. And I would implore y'all to check out, you know, pretty much all the big brokers do these state of the markets, both at the retail and the wholesale level. So through a quick Google search, you can find these state of the markets. And they're really eye-opening. For underwriters, as I don't know, I can kind of get into kind of tunnel vision of what I'm working on and the projects I'm seeing and I'm competing against. But it's really great to take a step back and look at the builder's risk market as a whole to see trends and whatnot. And so this was pulled from a 2024 state of the market, which came out, I think, in June of this year. But this was a large wholesale broker and they had mentioned in their state of the market that they continue to see growth in capacity, specifically growth in follow capacity markets. So I think builder's risk has been very profitable for a lot of companies that have been able to get their terms and conditions favorable to them. And so we're starting to see more entrance, especially in the follow markets of folks who are willing to just put up more builder's risk capacity. But that being said, while you see more overall capacity, we're still seeing limited cap capacity. So going back to the flood, named windstorm, earthquake, if you're looking, at one point there were lenders that were requiring full limits on those perils. And that's always been a very tough ask, if not impossible. And it seems to be that we're still at that point now to where if you're looking to get super high limit, that's gonna cost you a ton of money and it may not even be available in the marketplace. That being said, though, because of the continued growth in capacity, we are seeing a slight marketing softening as far as overall rates go within the market. Both frame, which ties into my next point, and non-frame, more traditional projects. There's just more capacity out there and so prices are falling slightly accordingly. Growth in MGA capacity. So we're seeing a lot more MGA players enter the builder's risk space, especially in the frame space. And so while frame capacity may have been hard to come by a few years ago, it's a little easier now. In fact, I saw a stat that a lot of large frame placements now are even being overlined, meaning that you have more carriers willing to get capacity than what you need. And therefore, as a broker, you have the ability to select the best terms and kick out the carriers that are being a little more restrictive. So as an underwriter, that's a big deal because a few years ago, maybe you were able to get a much more higher price that you thought was needed for some of these frame projects. And now that there's more capacity and prices are dropping, maybe it's to a point to where you aren't comfortable in offering insurance for that low of a price. Or maybe you are, it just depends on your underwriting appetite. And so just another interesting thing to point out in today's market. And then lastly, it's been a lot of challenges in high wildfire and crime score areas. Wildfire risk is a big deal as we start to see these, or we start to see the frequency of these large wildfires only increase. And so in places where maybe a few years ago, it was easy to get a lot of capacity in some parts of California, some parts of Colorado, Tennessee, et cetera. Maybe now it's a little more challenging due to those large wildfires. And same thing with crime. And we saw starting in 2020, moving even to now, some cities have a big uptick in crime. And that certainly has affected the builder's risk marketplace as well when it comes to, excuse me, death losses, death vandalism terms, deductibles rates and whatnot. So I know that was a lot, but we are on the questions portion if anybody has any. And I certainly appreciate the questions that have already been asked. And I'll give it a minute or two to see if anyone submits anything into our question box here. Okay. Lillian, I think we're good. I guess I must have just answered every possible question somehow. You covered a lot today, Cody. And thank you so much for this informative session on builder's risk insurance. So do you have a most engaged attendee or best question? Yeah, I do. And I certainly appreciate all the questions that were submitted, but I'd have to say our most engaged audience member is Julie Hart. So shout out to Julie Hart. Thank you so much for your questions and really appreciate everyone's participation though. Congratulations, Julie. Yes. Congratulations, Julie. We'll send an Amazon gift card to you tomorrow upon the conclusion of the four-day class. I'd also like to thank my colleagues, Ali Monreale and Eileen Monreale for coordinating the session and for working behind the scenes to manage the technology for the class today. We invite you to join us tomorrow for the final session, which will be the introduction to fine art insurance class with Andrew Christina. And you'll use the same link that you used today. Also again, for the PDF of the slides from today's presentation that Cody just presented, I emailed them this afternoon to everyone. So everyone should have a updated copy of the slides with revisions from today's session. After tomorrow's session, you'll receive a survey link. We value your feedback. So please take a moment to share your thoughts with us. Thanks again, Cody. And thanks also to you, our attendees, for your participation and questions. Enjoy the rest of the day. This concludes today's class. Thank you. Have a good one.

Builder's Risk Insurance

Construction projects

Policy terms

Safety net

Unexpected losses

Contractors

Owners

Developers

Underwriting

Construction type

Materials

Risk factors

Coverage limits

Soft costs

Loss of rents

Inland Marine Builders' Risk Insurance

Cody Williams

construction environment

IMUA policy

coverage types

construction terms

Infrastructure Investment and Jobs Act

construction risks

underwriting specifics

geotechnical report

coverage exclusions

equipment breakdown

natural catastrophes

insurance market dynamics