Amid the stubborn coronavirus pandemic, institutional capital and developer investment has paused, forcing contractors to take a wait-and-see approach for their direction in 2021 and beyond. While the industry cheered the economic comeback of the third quarter after a record second-quarter slowdown, developers and builders remain cautious, particularly in sectors deeply affected by the pandemic and the associated shutdowns – namely office buildings and hospitality. Well-capitalized projects, including those funded by municipal bonds, appear set to continue on plan while other more speculative investments have been sidelined indefinitely.
This podcast features:
- Nathan Levine is a Senior Vice President in CRC’s Boca Raton, FL office and an active member of the Casualty Practice Group
- Michael V. Yovino is an active member of the Casualty Practice Group and Senior Vice President in CRC’s Long Island, New York office.
Dan Wentz 00:00
The last 12 months have been very turbulent for the construction industry in 2020. The industry cheered and economic comeback after a record second quarter slowdown due to the Coronavirus. There were significant losses from the pandemic and active hurricane season, and huge wildfires in California, Colorado and Oregon. And more recently, the Surfside condo collapse in Florida has put more scrutiny on similar types of construction, our insurance carriers reacting to all of these factors and what lies ahead. We're joined by two members of CRCS casually practice group at Villa vine, who's a senior vice president and CRCS Boca Raton, Florida office, and Michael iovino, a senior vice president in CRCS, Long Island, New York office. Welcome to the placing you first podcast from CRC group. I'm your host, Dan Wentz. And this podcast features news and insights from CRC group's vast knowledge base of 4300 plus associates who write in excess of $23.5 billion of premium annually, and we're giving you insider access to what's happening in our company and the types of insurance we place. This is the placing you first podcast what's going on in the construction industry right now? What is the latest? And I guess we'll start with Nate First, if you want to kind of give us a little update is so what's happening, what you're seeing, as far as insurance for the construction industry is
Nate Levine 01:22
the projects that were delayed back in 2020, due to COVID are starting to come back to life. We're seeing projects that were initially quoted a year and a half ago, to a year ago that all of a sudden suddenly stopped due to COVID are now resurfacing, one of the biggest dilemmas that's causing these projects to be delayed as well, is not only permitting, delays, but also the delay of getting certain materials. There's been a serious shortage of concrete, plywood has skyrocketed. The idea of being able to get appliances you have your marketing reps from these major GC and developing corporations out out trying to find appliances for their projects all over the country. Wherever they can get distributorship. They're actually buying, they're actually taking warehouse space to house the appliances the wait for the project complete so they can try to finish on time. So the there's a delay in window manufacturing, a lot of things are now just starting to get re geared up to 100% full speed due to due to COVID. Wow. So
Dan Wentz 02:41
I you know, I hadn't heard of the appliance thing. I heard of the lumber. Obviously, everybody's crying about lumber prices right now. But appliances, never, you know. Yeah. Think about that. Mike, are you seeing the same thing? When it comes to delays, prices rising and all that stuff? You know, materials, being hard to come by?
Michael Yovino 03:01
Sure. To answer that. I would agree with what Nate's saying. I mean, the projects I mean, to go back to the question, though, is is what's happening and we see in the effects of, you know, the pandemic still in the industry. Projects are coming back. They're they're different, though. there's not as many for sale residential jobs going. There's more for rent. So the industry shifting a little bit that way. We are seeing more infrastructure work moving forward, large scale projects within cities. That had been put on hold for a bit. As far as delays. Yeah, there's there's delays due to material. project costs are going up as a result of the cost of material, you know, and then the delays in getting that material. I have a contractor right now that's, you know, waiting up 90 days for Windows, so that their projects been sitting there just waiting. Our insurance looking to do more, though, yeah, I mean, we're seeing things progress. There, submissions are coming in, they're going to quote stages, it looks like the larger developer builders can get the funding they need. So projects are moving forward a little quicker than they were, say a year ago, 18 months ago. Part of the delay, though, that I think is coming into play in this besides material is labor. A lot of these contractors are having a very hard time finding skilled labor to come back to work. And they're finding them they're finding themselves short staffed when it comes to getting people on site. So part of the concern in the industry might be Do we have enough of the right labor to to get these jobs done safely? So that's that's a new question mark is as a result of the pandemic, are things looking up? I would say things are looking much better than they were 18 months ago, and it's just good to see the industry moving again. Yeah, for sure. It sounds
Dan Wentz 04:55
like there's a lot of pent up demand and you know if these people can just Get on the get their hands on the material and the labor to make things happen. It's going to explode. What about specific segments?
Nate Levine 05:07
Well, I think Mike, hit on it briefly there. And what he was just stating, I think there's an influx of more rentals being developed. Also a huge influx of single family housing in this in the southeast. Matter of fact, to the point when you talk about a labor shortage right now, these these housing projects that are going up in the area, a they're selling as soon as they put a lot out for sale, and but to is there, they've reached maximum capacity point that if they had the labor, they they could be they could be finishing these developments within a year and a half. But due to the labor shortage, and skilled labor in particular fields, these projects are getting delayed like three and four years. And they've had they've had to stop sales in certain developments, because they can't complete the home within a two year span. I also think there's going to be another major influx of single family home development down here due to surf site. I think people who were contemplating and looking at buying a condo are now thinking twice about going into a high rise structure that spec especially of a certain age restriction.
Dan Wentz 06:26
Yeah in Surfside, right, you're talking about the the high rise condo on Miami Beach, the collapse, right? Correct, tragic incident right now, they're, you know, from what I understand, they're, they're looking all over Florida now making sure that those high rise buildings are up to code or up to spec, you know, that we don't have another issue like that.
Nate Levine 06:45
But there's going to be I think there's going to be some very hard restrictions that are going to be put out on these inspections, that they're going to have a certain timeframe in order to get these repairs done to keep the building safe and sound.
Dan Wentz 06:58
So any indication as to how that's going to affect things in Florida. I mean, obviously, we've had tragic event there. Yeah, regulation in a play into things are too early to tell.
Nate Levine 07:10
Well, I think regulation is going to come into play. But also I think what's happening is it's carriers from a permanent placement on the on these buildings are taking a second look, whether they're going to even write something that's 25 years and older without certain certifications being approved,
Dan Wentz 07:28
talking about carriers specifically, how are they approaching the construction industry, you know, generally as a whole right now, as far as rates capacity, are there any areas of concern?
Michael Yovino 07:39
You know, again, looking at this segmented around the country, I mean, you could get, you can come up to the northeast, we have New York, always problematic, difficult, challenging market capacity is there's usually less capacity than there is more surplus in New York. So you know, finding the right market, there could be one or two carriers for a particular class and other classes, there could be five or six. We've had a few carriers exit the New York marketplace in the past 18 months, from a project standpoint, project and practice policy standpoint, they've exited the the space and but we've also had new capacity come in from it, you know, we're seeing more FPGA capacity come into the market in New York and around the country, you know, Nate touch on Florida a little bit, that's that's become problematic or not so much problematic. But again, it's a challenging market, other areas that are challenging around the country, any type of construction that's framed, it could be framed for sale for praying for rent, three, four, you know, especially four and five storeys, the capacity is getting very limited. So that there there are pockets of construction throughout the country that still remain problematic that still fall into the DNS space, which is you know, where we come in to help from specialization, right? And, you know, projects such as wrap up c sip steel only project specifics on top of classes, still falling within the CRC space as an area for us to help out. And so there's always challenges but some new capacity is welcome. You know, I'm sure Nate would agree with that. It's it keeps the market moving and fluctuating between hard, hard was hard and soft, depending on what the risk is. So, you know, it's kind of a it's a, it's an evolving space.
Dan Wentz 09:39
Florida, you mentioned you know, had the surf side issue down there. What else is going on in Florida, Florida has always been particularly challenging, I think
Nate Levine 09:47
carriers are revisiting their their criteria in terms of, of being able to write in the state of Florida, ie they're also looking at certain height restrictions and the number of units that they will they will take in order to write a no set policy set on a residential condo. So it's it's, you have a limited number of carriers that are playing in the residential space. And obviously, Florida being one of the major CD states in the country, it's, it's being looked at extremely carefully. And this since Surfside has happened, you have you have carriers that are now looking at it even on the practice policy basis. And thinking about putting a height restriction on the policy where these guys were writing the trades, as as well as a limitation of number of units. So Florida's Florida's extremely difficult right now,
Michael Yovino 10:53
let's pivot a little bit and talk about agents. So generally, what do you think agents should know right now about what's going on today, and in the near future in the construction, industry and insurance. As far as that goes here in the E and s space, the biggest thing I would say is, especially with construction agents should be working with knowledgeable wholesalers that actually focus on the space. They're specialized in it, it's such a specialized class of business, there's so many nuances to it that you need to you can get tripped up not having proper, you know, even named insured or additional insured endorsements, you see sip verbiage versus Oh, sip verbiage on policies, you know, having that specialization is something they should be aware of. As far as the industry and carriers The biggest thing, you know, is capacity. I mean, I think trying to find capacity at the right price, we bid, a lot of times our agents come to us to bid work for these contractors, it could be six months a year out. And the problem is the job comes in 18 months later, and the industry the rates are, you know, 4050 60% higher. So now we're missing the mark. And, you know, they've bid this work 18 months ago, and you know, the cost of insurance is much higher than what they had bid plus binding capacity, depending on the class, there are certain classes of business where, you know, the carriers have shrunk down, there's they're very difficult to find blocks of 25 million elimite anymore. I mean, there there are certain instances where in the first 15 million, we could have six or seven carriers on and getting those carriers to, you know, work together and getting their forms to match up so that there's no gaps in coverage, that's that's something else that agents should be mindful of to make sure that there's you know, a clean form all the way through. You know, there's just a lot of little things like that, that I think agents should be aware of, and you know that the need for a full and complete submission is always important to the better, the better the information going into the market, the faster the turnaround, and the more the more responsiveness they'll they'll receive from the carriers, including their risks.
Nate Levine 13:08
One of the key things that you're seeing in the excess marketplace on on construction, is that where carriers were were putting out, you know, 25 million leads, or 10 million leads on a residential proposal, they're now putting out shorter limits. And when Mike was saying, stacking of many carriers in that first 25 to six is highly, you know, feasible that it's going to happen. I know where you're getting a 10 mil lead before, you're now getting a 3x a primary or a 5x a primary. And you'll have to stack up from there. And it could be on a quota share basis, because carriers in the residential space want to be ventilated. So it's it's it's extremely important that you know, as Mike to dovetail on what Mike said, being with people working in the construction industry is very specialized. And dealing with a broker that does this type of work every day is extremely important.
Dan Wentz 14:11
It will get you the best results. Okay, well, great. Did we miss anything today that you guys were wanting to bring up or talk about?
Nate Levine 14:20
I think I think the only thing that I would add, you know, getting a proper submission, what does that curtail? You know, a very good supplemental. If it's if we're talking, oh, CIP, see CIP. The geotech Report, loss runs to the GC site plan. All those benefit us when we go to market in order to get the best potential deal for the customer. Be there that's what their underwriting profit,
Dan Wentz 14:51
you need to have a quality submission put together and spend your time and get all of those elements put together. And if anybody's not clear on what that means. Obviously that's where you guys come in you can, you know they can talk to you. You're out. Yeah, guide
Nate Levine 15:03
them through us. So,
Dan Wentz 15:05
for you guys ever to go to market with it, they've got all the information they need together, the underwriters are gonna want to see. Okay, well thank you guys so much for joining us today. I know you've both been very busy. It's a busy time of year for our business. So I really, really do appreciate your time and hopefully we get to talk again soon.