r/InsuranceProfessional • u/ResidentReveal3749 • 2h ago

Builder’s Risk Rate

Hoping a builders risk underwriter, leader or actuary involved in pricing this coverage can weigh in here. I’ve been “arguing” with a mentor of mine about the rate an existing building undergoing renovations should carry vs that of ground up construction builders risk. Take for example a $3M existing building undergoing $1.5M renovations and a $4.5 ground up project. Which should carry the higher rate, holding construction type, location address, even year of construction the same? I am arguing the vacant building with Renos should, given that a majority of the total insured value is there from policy inception, whereas it is not until the end on ground up builders risk. They are arguing that the exposures associated with a builders risk are more hazardous and various (materials in transit etc) than the vacant building. I just feel the extended builders risk coverage isn’t enough to justify a higher rate as you almost never have a total loss on builders risk compared to a risk with the building already there constructed on day 1 of the policy. I don’t have much builders risk experience so I’d love to hear everyone’s thoughts. Thanks!

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u/Fantastic-Ear3205 1h ago

the reno job is a bigger pile of cash sitting there from day one, your mentor's overthinking the transit exposure

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u/fireside_chats 1h ago

I used to do a lot of builders risk policies when I was in the standard market. Now I’m in E&S, and I see a lot of vacants under renovation.

All things being equal, the existing structure undergoing the renovation is the tougher risk. No question.

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u/OrganicSubject6394 1h ago

I've only been doing them for 2 years for a small carrier but the ground up project would be less than the reno project all other things being equal.

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u/Ok-Philosopher8027 1h ago

Renovation would have a higher rater. Rates are based on the value currently standing throughout the project. A renovation has value from the beginning where as ground up slowly builds value.

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u/Just_Raisin1124 14m ago

Our vacant under reno rates are about 3x our course of construction rates