Large Real Estate Developer Commercial Insurance Case Study

By partnering with MB Davis Group, a strategic, knowledgeable, experienced commercial insurance consulting firm, the sizable construction deal was not only able to move forward, but the client walked away with guaranteed capacity to cover the project.

Here’s how.

Get to Know the Client

This client of MB Davis Group was a real estate developer who intended to construct several billion dollars’ worth of apartment buildings across half a dozen states.

The plan was to undertake this project over twenty-four to thirty-six months.

Struggling to Obtain Adequate Builder’s Risk Insurance

For construction projects of this type, there is a required insurance known as Builder’s Risk insurance. Very generally, it protects the construction project from property loss. This includes varying types of damage (fire, wind, hurricane). With Builder’s Risk insurance, if your building burns up or blows away halfway through the construction process, you have insurance coverage to pay for those losses.

This particular client was coming up against two major problems related to their Builder’s Risk insurance:

• In today’s insurance landscape, this type of coverage is much more difficult to obtain.
• Some of the areas where the client intended to build were prone to hurricanes.

“My nightmare with this client was that I’d have to call him on Tuesday and tell him the project he wanted to start on Thursday couldn’t move forward because we couldn’t secure the necessary insurance,” said Mitch Davis, lead risk management consultant, MB Davis Group. “I didn’t want to be in that position. And the client definitely didn’t want me in that position either.”

The question became this: How could MB Davis Group develop a plan for a series of apartment buildings worth several billion dollars…with confidence the client would receive the necessary insurance coverage when building?

Dispersing Financial Risk with a Master Builder’s Risk Program

No single insurance company was prepared to cover the client alone because it was too much potential financial risk. So, the solution ended up being a master Builder’s Risk program.

In this program, one insurance company took the lead, and then a group of other insurance companies contributed as well, accounting for the remaining coverage gaps. Importantly, in this system, the client was guaranteed the capacity necessary for their projects.

How did MB Davis Group manage to persuade that group of insurance companies? By preparing a series of sophisticated safety presentations.

Using people from within the client’s construction division, with help and guidance from the MB Davis Group office, a series of virtual and face-to-face meetings were set up with the insurance companies.

During these meetings, the client outlined exactly what they were doing to address jobsite safety. In these presentations, they accounted for a laundry list of risk factors:

• Water damage
• Fire
• Wind
• Site vandalism and theft

Because of the professionalism of the developer and the hard work of some highly talented insurance brokers, MB Davis Group was able to find a group of insurance companies prepared to commit capacity to this program.

And they were prepared to make that commitment because they were persuaded it was a smart, safe, calculated investment.

Securing Adequate Commercial Insurance Coverage…at a Known Price

As a result of that new master Builder’s Risk program, the client enjoyed two significant benefits:

• They were confident they would have adequate, gap-free coverage when building their construction projects.
• They knew how much that insurance coverage was going to cost them, which led to more accurate, less stressful budgeting.

From the standpoint of the insurance companies, they felt confident their safety-related requirements would be met, leading to safer jobsites and having to worry less about their financial risk.

“Yes, a big part of my job is saving people money on their commercial insurance,” said Davis, “but an even bigger part is contributing to safety. When we all work together toward that goal, we create systems that ensure everyone gets to go home at night.”

This mindset and project stand in stark contrast to historical projects.

On January 5, 1933, construction began on the Golden Gate Bridge with a budget of around $35 million. During this time, there was a boom of large capital expenditure projects, and the engineers developing these programs used a gruesome rule of thumb. For every million dollars in project expense, they budgeted one fatality.

Thirty men fell from the Golden Gate Bridge during its construction. Safety nets saved nineteen. Eleven lost their lives.

“Engineering, construction, and insurance teams no longer accept operating this way,” said Davis. “We don’t live in that world anymore, and I’m proud to play a role in that.”

Get Personalized Advice and Guidance on Your Trickiest Commercial Insurance Problems

Every year, it’s getting harder for large-scale, large-risk projects to secure affordable insurance coverage. In many cases, it’s even becoming more difficult to get adequate coverage. Period. This leaves many companies and projects at risk of:

• Prohibitively high insurance premiums
• Unfavorable insurance terms
• Potentially crippling gaps in insurance coverage

If you’re looking for personalized guidance on how to protect your company through your insurance program—now and in the future—bring your questions to MB Davis Group.

By booking your no-cost consultation, you have thirty minutes to talk to a live commercial insurance consultant expert about the specific insurance challenges and issues you’re facing in your business.