The New Option Visibly Different Construction Real Estate

The New Option. Visibly Different. Construction & Real Estate Insurance Discussion

AGENDA Ø Ø Ø Ø Ø Types of Insurance Wrap-Ups Administration Builder’s Risk Professional Environmental Loss Control Claims About Alliant 2

Common Construction Insurance Lines General Liability Workers Compensation Excess Liability Covers third party, bodily injury & property damage arising out of premises, operations, products, and completed operations Provides wage replacement and medical benefits to employees injured in the course of employment Provides additional limits over the primary general liability policy with all of the coverage features of the underlying policies Builders Risk Property insurance which covers materials and equipment should they sustain a loss or damage from a covered cause during the course of construction Contractors Equipment Provides insurance for mobile machinery, equipment and tools. Covered equipment may be owned, rented, leased or borrowed 3

Common Construction Insurance Lines Riggers Liability Contractors Pollution Liability Insurance for a contractor's liability arising out of the moving of property of others, such as lifting airconditioning units onto a roof with a crane. The CGL policy excludes "personal property of others in your care, custody or control. " Covers thirdparty claims for bodily injury and property damage for remediation costs stemming from pollution incidents resulting from a contractor’s covered operations Pollution Legal Liability Covers property owners for third party bodily injury and property damage and clean-up costs for pollution conditions on owned and operated properties Project Professional Liability Covers property owners for bodily injury and property damage arising out of the work of design professionals providing services related to a project Owners Protective Professional Indemnity Excess coverage over designer professional policies for project owners for bodily injury and property damage arising out of the work of design professionals 4

What is a Wrap-Up? Wrap-Ups are widely used on public and private sector construction projects Can be sponsored by owner or general contractor Through a Wrap, the owner of a construction project provides general liability insurance and workers compensation for all eligible parties, including the general contractor and all sub-tier subcontractors Wrap-Ups can be utilized on a single project with a construction value of $5 M+ or on multiple projects that are combined into a “Rolling” Program Proprietary & Confidential 5

What is a Wrap-up? Traditional Insurance Approach q Multiple Insurers q Inadequate Limits q Potential Gaps in Coverage q Potentially Uninsured Subcontractors q Cross Litigation Between Contractors q Indemnity Issues Owner General Contractor XS GL WC Subcontractors XS GL WC XGSL W C WC Wrap-Up Program q Control q Cost Reduction q Competitive Advantage q Higher Coverage Limits q Consistent Coverage Across Contractors q Coordinated Claims q Minimize Cross Litigation/Subrogation q Allows for a Larger Qualified Contractor Pool Proprietary & Confidential XS GL WC XS XS GL WC XGSL GXSLC W C WC W XS GL WC GXSLC W XGSL W C WC XS GL WC XGSL GXSLC W C WC W GXSLC W Owner General Contractor XS GL WC Subcontractors 6

Wrap-Ups vs Traditional Approach Wrap-Up Cost • • Coverage Limits Claims Same coverage terms for all parties Dedicated program limits • • Administration / Program Setup • • • Other projects Owner/Contractor receives maximum financial benefit Owner posts collateral and pays premiums Owner controls claims for completed operations period Broker provides claims advocacy Owner sets contractor insurance requirements and assembles underwriting data Owner monitors program progress Broker administers program Owner can include multiple projects in its Wrap-Up program TRADITIONAL APPROACH Higher overall costs for Owner Contractor policy coverage terms vary by individual contractor Contractors have varying limits of insurance that may be eroded by multiple projects • Cross-litigation between contractors • Individual contractors responsible for their own claims • Potential bad publicity from unresolved claims Owner sets contractor insurance requirements Other projects cannot be included in the same program unless the same GC is utilized 7 7 Proprietary & Confidential

OCIP vs CCIP OCIP Cost • • Coverage Limits Claims Administration / Program Setup • • GC receives maximum financial benefit Contractor posts collateral and pays premiums Same coverage terms Dedicated program limits Limits can be dedicated or shared depending on program structure • • • Other projects Owner receives maximum financial benefit Owner posts collateral and pays premiums CCIP Owner controls claims for completed operations period Broker provides claims advocacy Owner sets contractor insurance requirements and assembles underwriting data Owner monitors program progress Broker administers program Owner can include multiple projects in its OCIP program through a “rolling” OCIP General contractor controls claims for completed operations period • • GC manages contractor insurance requirements and program administration Broker administers the program Other projects cannot be included in the same program unless the same GC is utilized 8 Proprietary & Confidential

WRAP-UP Coverages Additional Coverages $4 M General Aggregate $4 M Products/Completed Ops Aggregate $2 M Personal/ Advertising Injury Builder’s Risk $2 M Combined Single Limit Workers’ Compensation General Liability Employer’s Liability Follow Form Excess Liability Owners Protective Professional Indemnity $50 - $200 Million+ Contractors Pollution Liability Pollution Legal Liability $25 Million Excess Liability CPL OPPI PLL 9 Proprietary & Confidential

WRAP-UP Financial Model Loss Sensitive Program Maximum Savings Owner Cost without OCIP Owner Max. Cost with OCIP Minimum Savings Typical Savings Cost Avoidance (0. 5% - 1. 2%) of Construction Cost Claims Minimum Cost Fixed Expenses (Insurance, Excess, Administration) 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Loss Ratio Savings Proprietary & Confidential = Contractor Insurance Costs - Wrap-Up Costs - Losses 10

Pro Forma $200 M Wrap-Up Example PROJECTS $ 200, 000 $ 40, 000 Construction Value Payroll (20%) CONTRACTOR INSURANCE COSTS Total $ CIP PROGRAM COSTS Total OCIP Program Costs % of CV LOSSES PREMIUM 5, 500, 000 % OF CV 2. 75% MINIMUM $ PROGRAM COSTS PLUS LOSSES LOSS AGG+CLAIMS EXP 2, 400, 000 $ 1. 20% INSURANCE CREDITS 3, 100, 000 1. 55% MAXIMUM $ 5, 500, 000 2. 75% PROGRAM SAVINGS % of CV 2. 75% (@max) % OF CV REDUCTION IN INSURANCE COST 0% $ - $ 2, 400, 000 $ 5, 500, 000 $ 3, 100, 000 1. 55% 56% 10% $ 310, 000 $ 2, 710, 000 $ 5, 500, 000 $ 2, 790, 000 1. 40% 51% 20% $ 620, 000 $ 3, 020, 000 $ 5, 500, 000 $ 2, 480, 000 1. 24% 45% 30% $ 930, 000 $ 3, 330, 000 $ 5, 500, 000 $ 2, 170, 000 1. 09% 39% 40% $ 1, 240, 000 $ 3, 640, 000 $ 5, 500, 000 $ 1, 860, 000 0. 93% 34% 50% $ 1, 550, 000 $ 3, 950, 000 $ 5, 500, 000 $ 1, 550, 000 0. 78% 28% 60% $ 1, 860, 000 $ 4, 260, 000 $ 5, 500, 000 $ 1, 240, 000 0. 62% 23% 70% $ 2, 170, 000 $ 4, 570, 000 $ 5, 500, 000 $ 930, 000 0. 47% 17% 80% $ 2, 480, 000 $ 4, 880, 000 $ 5, 500, 000 $ 620, 000 0. 31% 11% 90% $ 2, 790, 000 $ 5, 190, 000 $ 5, 500, 000 $ 310, 000 0. 16% 6% 100% $ 3, 100, 000 $ 5, 500, 000 $ - 0. 00% 0% 11

WRAP-UPS Cost Savings Options Net Bid Subcontractor Bids Without Insurance (Bid Accepted) Savings Estimated Insurance Add Alternate Bid Credit Tracking Insurance Cost Identified & Reviewed Subcontractor Bids With Insurance Included (Bid Adjusted) Savings Identified Up-Front (Not adjusted by project end) (Bid Adjusted) All Insurance Costs Identified and Removed 12 Proprietary & Confidential

WRAP-UPS Realizing Financial Benefits Ensure proper bidding • Contract language • Education Large Deductibles Closeout 13 Proprietary & Confidential

WRAP-UPS Administration Establishing Program Upfront is Key to Success Education Use Wrap. X to Manage the Program • Ensure Adherence to National Standards/ Quality Control • Online Portal to Receive & Deliver Information Allows Alliant to Focus on Customer Service 14 14 Proprietary & Confidential

BUILDER’S RISK First party coverage for owner and contractors during the course of construction Provides all risk coverage, including the perils of flood, earthquake and coastal windstorm. Includes fixed and mobile equipment Delay in start-up Limits up to $500+ million 15 15

PROFESSIONAL LIABILITY Owners Protective Professional Liability Alternative to costly project professional liability coverage Excess coverage sits above designers’ policies Coverage is triggered when designers’ policies are exhausted $25, 000+ in limits Three years of coverage plus extended reporting period 16

ENVIRONMENTAL COVERAGE Contractors Pollution Liability Provides coverage for pollution conditions caused by covered construction operations, including subcontractors Applies to sudden and gradual pollution conditions Covers third party claims for bodily injury / property damage and clean up from on-site or off-site pollution conditions Limits available up to $200 Million 17

LOSS CONTROL Development of safety standards and training programs OSHA 10 and 30 monthly training seminars Active return to work programs 18

CLAIMS Establishment of Claims Procedures and Special Handling Guidelines Claim Reviews Coverage Questions Reviewed and Resolved Coordination in Production of Claims Kits and Insurance Manuals Facilitate Claims Process with Third Party Administration Litigation Management Definitive Close out Execution Plan for Open Claims and Reserves 19 Proprietary & Confidential

THE SPECIALTY BROKER Providing Service, Expertise and Risk Solutions to our Clients Agri-Business Healthcare Construction Public Entity Employee Benefits Real Estate Energy and Marine Tribal Nations Environmental 20

SPECIALTY INSURANCE LEADER. Alliant. The Premier Specialty Broker 2, 100+ Employees 2014 Premium $7. 8 billion Revenue $621 million 3 rd Largest Privately Held Broker Financial Partner Stone Point Capital Alliant Construction Services Group 380 Construction Specialists Over 2, 000+ Clients 2014 Premium Volume $850 M 21

OUR NATIONAL PLATFORM 22

GROUP METRICS 380+ Construction Colleagues National Platform 2, 000+ Clients Contractors, Developers, Engineers & Homebuilders $850 M+ Premium Volume 23

Alliant Exclusive Solutions and Programs

THE ALLIANT APIP SOLUTION Alliant’s Public Entity Exclusive Property Program (APIP) • Largest single property placement in the world with over $350 billion in Total Insurable Values (TIV) • Over 9, 300 public entity members across 44 states • Enhanced coverages – – – Terrorism Boiler & machinery Inland marine 1 st and 3 rd party cyber liability 1 st and 3 rd party pollution liability • Appraisals every five years on buildings valued greater than $5 million at no cost • PML Studies 25

THE ALLIANT MROCIP SOLUTION Alliant’s Public Entity Exclusive Group Wrap-up Program OCIPs traditionally available only for projects exceeding $100 M The Answer: MROCIP Innovative “pooled” approach extends the benefits of OCIPs to Public Entity’s with: $10 M Single projects as low as $10 M $100 M Individual or aggregated projects totaling $100 M+ 26

The New Option. Visibly Different.

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