Infrastructure work involves upgrading and restoring bridges, roadways, airports, wastewater treatment plants and other public use facilities. Healthcare spending likely focuses on expanding existing hospitals and healthcare facilities. This segment had been growing prior to the economic downturn and is expected to increase substantially with the stimulus.

The drive for sustainable energy sources is expected to fuel the growth of wind farms, solar technology, geothermal and waste-to-energy plants and other alternative energy sources. Unlike some of the infrastructure repair and maintenance projects, this area will generate new initiatives.

In terms of the overall insurance market, buyers will look to spread their risks among a number of carriers to avoid a major impact on long-term liabilities and defaults that would have a material effect on risk transfer and claims-paying ability.

Beyond the general parameters, agents and brokers should be knowledgeable about and prepare for these specific areas related to the stimulus plan: The need for speed
With the initial emphasis on shovel-ready projects, agents and brokers may face significant time constraints in writing policies as their clients race to submit bids. Their workloads may increase and deadlines will tighten. They may not have all of the information at their fingertips, or they may have a lot of information to analyze in a short amount of time. At the same time, producers will need to be particularly vigilant that contractors, in their rush to secure work, pay attention to sound risk management practices, safety and quality, among other considerations. Finally, with pressure on states and municipalities to quickly use the funds, there is the potential for them to forego or abbreviate the traditional bidding process. This could lead to a rise in claims from contractors who believe the bidding process was unfair. Limits still subject to cost-cutting pressures
As the size and number of projects decreased over the past few years, many construction firms, contractors, engineering firms and others lowered their limits. In some cases, they didn't need the higher limits for the smaller projects that replaced large jobs. Many also were focused on cutting costs and were more concerned about covering ongoing business needs rather than worrying about what might happen in the future, when they might not even be in business.This cost-cutting pressure exerts a strong influence as the economy continues to struggle. Agents and brokers will see ongoing efforts to scale back, including higher deductibles and less catastrophe coverage, as well as establishing more realistic limits. From the carrier point of view, however, this drive to reduce expenses could be challenging. Catastrophe protection rates and premiums have increased dramatically during the last 5 years. All carriers are adhering more strictly to catastrophe modeling as a major part of the pricing basis and accumulation control to ensure claims-paying ability and solvency and to meet rating agency requirements. Rates in the property construction segment are increasing with the major toll on:

o Catastrophe-driven business

o Difficult classes of construction such as tunneling, underground works, transmission lines and wet marine works

o High-valued projects on the order of $1 billion and requiring world market capacity

o Clients with adverse loss experience

o Bankrupt clients

o Locations in major metropolitan areas that are highly exposed to terrorism and similar risks.

Overall, client rates and deductibles–”skin in the game”–will be increasing, but the buyers are likely to buy less insurance capacity and look to more sophisticated alternatives from their agents and brokers. Rates generally will increase as a result of a more conservative approach to transferring risk and the economy's continuing impact.

Green construction
A portion of the stimulus money is designed to increase energy conservation through green retrofitting as well as encouraging the use of green materials and green construction methods. This raises a number of issues. Specifically, many of the materials and techniques are relatively new and untested over time. Contractors may have limited experience working with and installing these materials. Their efficacy may be untested and unproven. Defects and product liability issues may emerge over time.

These factors must be considered, along with traditional construction liabilities and risks. From the builders' risk perspective, apparent exposures include: increased costs in replacement parts, particularly modular components; client attempts to include defects under the premise of resulting damage from faults in material, workmanship and design; and lead time in replacement of components affecting time element coverage.

Also, some insurance carriers have extended property and builders risk product covers to provide coverage in the event of an insured loss to the property to upgrade the structure to meet LEED (Leadership in Energy and Environmental Design) certification, generally at an additional premium. With the economic recovery taking off slowly, it is not likely clients will pay more for this coverage. However, those clients that have or are building to LEED standards would expect to be reimbursed on a similar basis without the endorsement coverage. Overall, it is important to note that project owners, developers and builders will be taking a hard look at the return on green building. Expected recovery time will be a key consideration. Right now, they may decide it's prudent to forego adding the additional expense of green materials. Often and early: The expanding role of risk management
To be most effective, agents and brokers must be part of their clients' risk management teams. In this climate and with some of the new risks and exposures, agents and brokers must be involved from the very beginning, including early on in the bidding process. If not, they may be unable to place covers effectively or adequately assess risk. This is particularly true in this highly competitive environment, where the winning bid may be separated from the second-place bid by just a fraction of a percent. In general, agents and brokers also will have to take a much broader role in evaluating exposures to company assets, particularly in the area of financial risk, whether it is insurance company capitalization or customer financial condition.

Finally, there is no substitute for actually visiting a site. Agents and brokers who have not been out to their clients' projects or facilities should consider visiting.

Public-private partnerships
Another important trend is the increase in public-private partnerships–a contractual agreement between a public agency (federal, state or local) and a private-sector entity. Through these agreements, sometimes referred to as PPP or P3 , the skills, capabilities and assets of both the public and private sector are combined to deliver a service or facility for the use of the general public. Among the reasons for the increase is that states simply do not have enough money to take on critical projects, including large projects that may be funded in part by the stimulus. On the private side, the expectation is that the surety market will harden and bonding capacity will begin to shrink. Finally, U.S. companies are likely to engage with more foreign partners. From an insurance standpoint, P3s require in-depth and comprehensive analysis of each entity and its specific requirements and coverage. For example, most requirements for builders risk coverage will likely require that the completed operating risk be incorporated in the coverage for continuity and to avoid coverage and claims gaps. Likewise, separation of the insured entities will need to be addressed to better understand what risks will be assumed, such as increased exposure to design risks that might have been the responsibility of a separate contract.

Looking forward
As the hard-hit construction industry looks to the stimulus to jumpstart and sustain its recovery, agents and brokers will play a critical role. By understanding the new risks and situations posed by some of the bill's provisions, agents and brokers can help their clients and themselves take full advantage of the new opportunities.