ORLANDO, Fla. — While there have been positive developments for the construction insurance industry, unforeseen developments could negatively impact it as well, according to a speaker at a contractors professional liability insurance underwriters session Monday at the International Risk Management Institute Inc.'s 32nd construction risk conference in Orlando, Fla..

Martin J. Andrejko, Philadelphia-based national underwriting director for professional liability-construction at Zurich North America, said two factors that “should show a positive claim trend” because it leads to improved communication are the increasing use of building information modeling, which is a technology for creating a three-dimensional digital model of a building, and projects involving integrated project delivery, where there is a cooperative business relationship among the project owner, the design team and the primary contractor.

Furthermore, said Mr. Andrejko, the increased competition among insurers fosters innovation “as we try to figure out ways to fill coverage gaps without significantly hurting our bottom lines.”

However, as was the case with Chinese drywall, unpredictable problems could arise, such as with green construction, Mr. Andrejko said. It could turn out that a green product “breaks down much too quickly, or causes environmental issues, “he said.

“There's always those black swans that are out there, and we address them when they come and try to go on from there,” Mr. Andrejko said.

Also speaking at the session was David Grigg, profit center head of professional and pollution lines for XL Construction, a unit of XL Insurance America Inc., who said that while there is competition in the contractors professional liability market, “I don't see there's a huge feeding frenzy from a pricing point of view.”

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Ray Bustamante, Atlanta-based director of contractors professional liability for Catlin U.S., said that in 2008 the decline in construction activity forced premiums down, but “the rate itself is quite stable. It's quite constant. It's not significantly changed.”

“What's potentially new, I think, is there's a lot of need in our industry to deliver products to our clients that are more performance-based” rather than traditionally liability-based in nature. One product already in use, for instance, is a rider to the contractor's policy that guarantees energy savings, he said.

Mr. Bustamante said, “I think this is where the line of differentiation for the future will be drawn for us as underwriters … supporting our clients in their endeavors to be performance-driven rather than liability-driven,” he said.

Mr. Grigg said that in addition to the ongoing evolution of enhancements, “There are structural challenges facing the market.” He said, “It seems every project is $1 billion” or more.

“We're seeing these jobs getting bigger and bigger and bigger. We're seeing the same joint-venture teams are getting together. We're seeing a relatively finite number of insurers who have the underwriting appetite, and appetite to put out sizeable tranches of capacity and low level attachment points, asked to support joint-venture programs and to put up capacity on a single project basis.”

This dynamic can “come to a screeching halt because we all have aggregation issues … and I think this is going to be a very challenging dynamic as we look out” in future years.

Mr. Andrejko said the train he rides to work goes over bridges built in the 1800s. “Hopefully, we have the political will” to embark on major infrastructure projects that will not be stopped by people with special interests.He said it worries him, though, that these projects “may get politically charged, and what that may do to us from the insurance exposure standpoint.”

The session was moderated by Jeff Slivka, executive vice president and chief operating officer of Bordentown, N.J.-based New Day Underwriting Managers L.L.C.