Builder’s Risk Insurance Declinations: An Interview With Susan DeCarlo
We sat down with Distinguished’s Builder’s Risk insurance expert, Susan DeCarlo, to discuss common factors that can lead to declinations in our program, how to avoid them, and key risk considerations. Backed by our specialized Builder’s Risk group, we deliver the highest level of expertise and service to provide the best coverage solutions for your clients’ needs. Let’s dive in.
What are your top 3 declinations?
I’ll start with our top declination, that would be prior starts. A prior start project is a project that has already started and either there is no coverage, the wrong coverage, or the current carrier will not extend for an additional period of time. We can consider a prior start if it’s in the early stages of the project. So, for example, on a new build if they’re 30 to 60 days in, we can consider that risk.
Underpinning and any structural work to a basement would be another declination. And the third declination would be fire restoration projects.
What are the factors that lead to a declination?
Even though it’s builders risk coverage, we still assess the condition of the property. Properties that are in poor condition may not be eligible. For example, on a remodeler’s project, the second floor has collapsed, or the overall integrity of the building looks compromised. And in those cases, it would be a declination.
Loss experience. We can consider weather related claims, but claims of theft, vandalism, and fire, for example, would be an automatic decline.
Another factor would be security. Is the project we are looking at in an area where surrounding properties are vacant and are boarded up?
What are some of the key factors you consider when determining appropriate coverage limits and deductibles?
So specific to limits, I just mentioned security. If we are comfortable with our exposure, we may consider increasing the AOP deductible and the theft deductible, depending on the underwriting analysis. Properties in a high wind hail area may be subject to an increased wind deductible.
And regarding coverage, if the named insured is the builder, or there is a relationship between the named insured and the builder, in that capacity we would exclude general liability coverage.
Are there any emerging trends in the construction industry that are impacting builder’s risk underwriting?
The construction industry is constantly changing, and yes, those changes can impact underwriting. For example, this has been ongoing since COVID but continues to have an impact – labor and product supply, and how that impacts whether we can extend a policy depending on the circumstances. Our max policy term is 24 months total, meaning the 24 months includes the initial policy term plus all extensions. We had an insured recently where we were at the max 24 months when the broker requested a three-month extension. It was a luxury home that had custom-made windows. The initial product was delayed, and when the windows were finally delivered, the size was wrong.
Cases like these are an exception, and we were able to offer the insured an additional three months over our max term.
We continued to monitor the builder’s risk market, paying attention to changes in rate and coverages.
Are there any industry sectors or project types that you are hesitant to insure?
Yes. We do not write manufacturing, hospitals, schools, or government properties. While we do write in older cities and we see a lot of older properties, we do not write historical properties. If a property is listed on the National Register of Historic Places, it would be a decline.
What is your view on the role of risk management programs in preventing losses?
The role and my view of risk management is critical to the success and performance of a program. It not only protects the program, but also the reputation with both our carrier partners and customers. It’s important to monitor results and get ahead of future threats, and this can help minimize financial losses.
For example, our Builders Risk program is 100% online, meaning a licensed agent can submit and bind online for qualifying risks. It is important our online platform has the right guardrails to ensure proper risk selection, mitigating the acceptance of unsuitable risks that could result in unnecessary losses. In this way, our risk management protocols not only protect the program but also uphold the high standards of underwriting integrity that our partners and clients expect.
Can you provide examples of similar risks that have been accepted in the past?
Yes. I put a couple of done deals together. The first project was a new build, 7,500 square feet, single-family home, framed construction in Lawrence, New York. The policy limit was $3 million, and we bound a twelve-month term for $6,700.
And the second project was for a remodel on a single-family home in Denver, Colorado. The betterment value was $200,000, and the existing structure was $460,000 for a total insurable value of $660,000. We bound the policy for a six-month term, and the premium was $1,300.
About Susan DeCarlo
Susan is the Vice President and Product Manager for the Vacant Building and Builder’s Risk programs, bringing over 24 years of experience with the company. In this role, she is responsible for overseeing insurance products to drive program profitability and growth. Susan holds both CIC and CPL licenses and is based in New Jersey.
About Distinguished Programs
Distinguished Programs is a leading national insurance Program Manager providing specialized insurance programs to brokers and agents with specific expertise in Fine Art and Collectibles, Environmental and Construction Professional, Executive Lines, Inland Marine, Real Estate & Builder’s Risk, Community Associations, Hotels, and Restaurants. Property and Liability products are distributed through a national network of agents and brokers. Serving the same core markets and partnering with the most stable and reputable carriers, Distinguished’s high-limit Umbrella programs remain the clear choice in its area of specialty for superior coverage, competitive pricing, and attentive service. Through thoughtful innovation, stemming back to 1995, Distinguished Programs fosters growth and opportunities for its brokers, carriers, and employees.
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