XL Insurance is seeking its first customer for a new product, introduced in March, that combines contractor and subcontractor default insurance for private construction projects.
Called CapAssure, the subcontractor default insurance part will work the same way as Subguard, the product launched 16 years ago by insurer Zurich North America that currently has virtually all of the subcontractor default insurance market.
Subguard is used to cover about $35 billion worth of subcontracting work each year, according to Nils Sorenson, Zurich's Subguard product manager.
CapAssure, in contrast, will provide coverage for both subcontractor and general contractor defaults.
According to XL Vice President Jason LaMonica, combined subcontractor-general contractor default insurance will provide an opportunity to eliminate any overlap that could occur when subcontractor default insurance is used by the general contractor but when the general contractor must also provides a surety bond to the owner.
In a a hypothetical example of a $100-million contract, $90 million of the work would be performed by subcontractors with about $10 million for the general contractor’s fee for general conditions and other responsibilities.
The surety is likely to “charge you against the full value of the job even if you want $10 million” as the maximum amount of the guarantee, LaMonica says.