The subcontractor default insurance market looks set to grow as more insurers prepare to offer the coverage, industry sources said.
Existing and new subcontractor default insurers are growing more comfortable with the coverage and have adjusted policy terms to reflect claims experience in the product area, they say.
Subcontractor default insurance, which allows contractors to insure against noncompletion of work or defaults by subcontractors, was launched about 25 years ago by Zurich Insurance Ltd. and is offered by only a few insurers, but the market will likely expand, sources say.
“We have had discussions with several carriers not currently in that market which anticipate being in it on some basis within the next 12 months,” said David Hewett, Marsh LLC’s U.S. surety practice leader in Baltimore, Maryland.
There are now six insurers providing subcontractors default insurance, three of which have joined the business within the last 36 months, Mr. Hewett said.
The subcontractors default insurance business had only one insurer until about eight years ago, when a second joined, he added.
Axa XL, a division of Axa SA and then known as XL Catlin, began writing the coverage in 2010, according to Rose Hoyle, a construction risk engineer in the subcontractor’s default insurance group for Axa XL in New York.
In addition to Zurich and Axa XL, Cove Programs Insurance Services LLC in Los Angeles offers the product as does Hudson Insurance Group, a New York-based unit of Odyssey Group Holdings Inc., each according to the firms’ websites.
Arch Capital Ltd. provides subcontractors default insurance and “have been a material presence for a long time,” according to a spokesman in an email.
Berkshire Hathaway Specialty Insurance Co. “offers it on a selective basis,” according to a spokeswoman.
“In the last three years, we’ve seen a number of new markets enter the space and we expect…
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