Big spender: how the $1 trillion Infrastructure Bill impacts insurance

Billions of additional dollars are now flowing into a large number of construction projects across the US, thanks to the federal government’s historic Infrastructure Bill.

With this $1 trillion wave of investment also comes a significant shift in the need for environmental insurance coverage and a push for better climate resilience.

Tom Williams (pictured), managing director, environmental & energy product line leader at Markel, spoke to Intelligent Insurer about the myriad opportunities this bill offers contractors, as well as the corresponding insurance requirements.

Williams, who has been in the insurance industry for 18 years, is responsible for Markel's casualty and pollution insurance products across multiple industries. He has worked in the environmental industry for more than 23 years.

“I and many of my colleagues within the environmental insurance industry began our careers as environmental consultants, so we’re familiar with the construction industry, as we spent many days on job sites wearing hard hats and steel-toed boots,” he said.

With this background, it’s no surprise that there are portions of the bill, such as its support for remediation projects, that are near and dear to Williams’ heart.

“Remediation projects are going to roll out within both the Environmental Protection Agency and the Department of Energy. They will address clean-up for legacy Superfund sites (recognised under the Superfund or Comprehensive Environmental Response, Compensation, and Liability Act of 1980), as well as brownfield redevelopments, to fuel urban growth initiatives in a number of cities,” he added.

“Clean energy and power is another large spending category within the bill, which will introduce projects to maintain or upgrade carbon-free energy sources and to explore additional future carbon-free energy sources, such as offshore wind.”

The bill also provides investment to improve energy transmission lines across the US in order to beef up the resilience of power delivery following a cat event such as a wildfire or a named storm, he added.

Williams pointed to further opportunities in the transport sector, as the Department of Transportation received the most funding of any federal agency. This cash will fund projects for airports, roads, bridges and other major projects.

“Given the funding for these infrastructure improvements, contractors will benefit significantly from the size, scope and overall number of projects in the transportation sector,” he added.

Offering context is the experience of a team at Markel that was recently successful in providing insurance solutions for a large airport project. The team worked across product teams to provide casualty, contractors pollution and site pollution insurance solutions for the owners and contractors of the project.

“We’re going to continue to see opportunities like these in the coming years as additional funds are allocated for similar projects in the transportation sector,” he said.

Insurance requirements

A bill like this does not come without caveats, and there are conditions that need to be met, particularly around environmental protection and climate change resilience. For example, Williams explained, a number of the government contracts will have “mandatory insurance requirements for pollution insurance”.

With these requirements in place, the bill is changing risk exposures for the construction industry, with knock-on impacts for the insurance value chain.

Contractors that currently purchase pollution programmes will need to have dedicated limits for project work, which will be typically achieved through a standalone project policy, Williams said. Smaller contractors working on large projects will need to confirm that they have coverage through an owner-controlled insurance programme or potentially a contractor-controlled insurance programme purchased for the project.

“Individual smaller contractors may have less experience with pollution coverage and should seek the advice of their broker to understand the risk factors and the types of coverage available to protect their specific interest on that project,” Williams explained.

Client support

This major change in insurance requirements is already underway, and Markel is working to support clients through it.

Williams said that the environmental & energy product line has launched a new contractors pollution form. It’s been designed to align with certain general liability language and with the handling of legal defence expense costs outside of the policy limits.

Underwriting support services may also benefit contracting clients. “We have an experienced and responsive claims team that will work through any claim. We also have dedicated engineers to assist in underwriting and provide clients with feedback following telephone or site surveys,” he said.

In addition to supporting clients via its pollution form and support services, Williams said that Markel's use of technology is playing an increasingly important role.

Technology and online platforms are key to the distribution of contractors pollution policies and other casualty products for small businesses or projects. Using these online platforms, “agents can quote, bind and issue a policy within a matter of minutes”, he said.

“These affordable online portal policies address the exposures of smaller contractors, yet the coverage will be as robust as a policy purchased by an international contractor with potentially more complex exposures,” Williams added.

As an example, he added, the Markel online pollution platform can handle up to $100 million in project hard costs or revenues for the contractor.

With a greater emphasis on environmental, social, and corporate governance (ESG) requirements, the bill will clearly have a major impact on insurance.

“Although contractors pollution liability policies have historically been discretionary purchases when not contractually required, the shifted focus towards ESG factors for corporate decision-making may influence risk management decisions, and ultimately the insurance purchase patterns of our clients,” Williams commented.

“As ESG continues to take a front seat in corporate decision-making, it may no longer be enough to have proactive written procedures to address general operations and environmental protocols.

“It’s going to become more imperative that a company purchase a pollution insurance policy to provide the financial means to restore our environment back to a pristine state following an unforeseen pollution event,” he concluded.

Tom Williams is managing director, environmental & energy product line, at Markel. He can be contacted at: thomas.williams@markel.com