Topic Thread

1.  Subcontractor Default Insurance

Posted 07-17-2017 09:27
Edited by Michael Hogan 07-20-2017 10:53
Our company is looking into SDI and I was wondering what the costs are for this product. In the case of a claim, is the payout 80% of losses after deductible and copay is met? Does anyone have anything they might be willing to share?

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Michael Hogan CCIFP
Construction Accounting Supervisor
Thompson Thrift Construction
Terre Haute IN
(812) 242-1198
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2.  RE: Subcontractor Default Insurance

Posted 07-18-2017 05:59
Michael - I underwrote Subguard at Zurich for four years.  If you'd like to call me this afternoon I can go into some detail on the premiums for the product.  My number is 610-256-3379.  4pm today or anytime tomorrow morning is good.

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Mara Johnston BA, MCP
Vice President of Business Development
Star America Capital Partners
Roslyn NY
(610) 256-3379
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3.  RE: Subcontractor Default Insurance

Posted 07-20-2017 10:49
Do you have anytime to discuss the product today or tomorrow morning?

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Michael Hogan CCIFP
Construction Accounting Supervisor
Thompson Thrift Construction
Terre Haute IN
(812) 242-1198
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4.  RE: Subcontractor Default Insurance

Posted 07-21-2017 06:08
Mike - I am available to discuss today after 2pm or Monday or Tuesday morning next week.

Let me know what works best for you.

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Mara Johnston BA, MCP
Vice President of Business Development
Star America Capital Partners
Roslyn NY
(610) 256-3379
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5.  RE: Subcontractor Default Insurance

Posted 07-18-2017 06:04
Michael, the pricing and payout is often based on your own claims experience.  Our policy is 100% payout but after a large deductible, with premiums in the .8-1.5% of covered subs range.  I hope that helps.

 

 

R. Patrick Lloyd  | Chief Financial Officer
Golden Construction, LLC
2212 First Avenue South
Birmingham, AL 35233
www.goldenconstruction.com
P.  205.327.6617  |  C. 205.283.8936  |   F.205.327.6667

 

  

 






6.  RE: Subcontractor Default Insurance

Posted 07-20-2017 10:51
This is very helpful. If you don't mind me asking, how much revenue do you do each year? Is this product only geared towards large firms? That is the feeling we got from a seminar we attended last week.

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Michael Hogan CCIFP
Construction Accounting Supervisor
Thompson Thrift Construction
Terre Haute IN
(812) 242-1198
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7.  RE: Subcontractor Default Insurance

Posted 07-21-2017 15:37

At the time we were signing up for the product we were looking at volume in the $75m-$100m range.  The underwriters told us at the time that was towards the lower end of the spectrum for what they like to cover.

I am guessing part of the reason for that is that the large deductible tends to weed out smaller projects from inclusion in the program, so they are likely looking for GC's who have larger contracts with subcontracts in the $1m range.  I would get more feedback from the underwriter who responded as to the criteria they considered.  Our program is thru Arch.

 

 

R. Patrick Lloyd  | Chief Financial Officer
Golden Construction, LLC
2212 First Avenue South
Birmingham, AL 35233
www.goldenconstruction.com
P.  205.327.6617  |  C. 205.283.8936  |   F. 205.327.6667

 

  

 






8.  RE: Subcontractor Default Insurance

Posted 07-18-2017 06:11
Hi Mike,

In addition to the cost, you may also want to investigate these critical points of comparison to a performance and payment bond provided by subcontractors:

  1. What protection go you get from a P&P bond, that is absent from subcontractor default insurance?
  2. When does subcontractor default insurance come into play compared to how a bond responds to a problem?


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Steven Golia
Director of Surety
Bonding Pros
Haddonfield NJ
(856) 304-7348
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9.  RE: Subcontractor Default Insurance

Posted 07-21-2017 10:14
​Michael; When dealing with SDI programs there are a variety of deductible options, co-pays waiver of co-pays and only 4 primary carriers  play in this space...a few are kicking the tires. If you were to ask Zurich, Arch, XL the three main carriers who the foremost authority on SDI is in the US..one person would be recommended by all three -Brian Carpenter of Willis Minnesota.  Brian is the foremost expert on SDI and has the most SDI clients under his management. The premium you will pay is a direct reflection on how stringent and robust of a Subcontractor prequalification program you have in place; the quality of your companies standard operating practices in the event of default and your Default history.  This is due to the fact that your company would control and cure any default in lieu of a traditional surety stepping in. My construction team here in Michigan has 4 SDI programs in place (All ENR 400 GC's) and I can attribute their overwhelming success back to Brian and our National SDI team.  Most companies do not realize or know  if they are or are not ready for an SDI program as they have never undergone the investigation/audit that an SDI carrier will make you undertake.  This is where an experienced SDI construction team can come in and help you evaluate your internal controls prior to  approaching any market and assist you in having the best in class internal controls to pass the carrier audits. The difference in pricing and deductible options afforded to you by the carriers are the direct outcome of these audits.  SDI is not a product you can implement with a broker or agent who does not have extensive experience with the product...the downside is to great.

I would be more than happy to facilitate introduction and meeting with our National SDI team and have you judge for yourself. We believe it is very compelling.

Mark S. Janes, Vice President, Willis Towers Watson

Bridgewater Place, 333 Bridge St. NW, Suite 710, Grand Rapids, MI 49504

Direct 616.464.2754, Cell 616.914.2197, Mark.Janes@Willistowerswatson.com



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Mark Janes
Vice President
Willis of Michigan
Grand Rapids MI
(616) 464-2754
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10.  RE: Subcontractor Default Insurance

Posted 07-22-2017 09:01
R Patrick Lloyd from Golden - your description of cost and size of contractor needed is right on.  Of course there is a lot more detail to know prior to taking the next step.  Best bet would be to have a discussion about it first to learn more - Michael, you may want to get a few opinions, but please do know that I am also here to help, should you need it.  I underwrote SDI for four years as I mentioned in my last email and have recently met with the heads of the product as well to obtain an update.  Just let me know.

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Mara Johnston BA, MCP
Vice President of Business Development
Star America Capital Partners
Roslyn NY
(610) 256-3379
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