Key Takeaways
- Bundles multiple insurance coverages into one policy.
- Two main types: owner-controlled and contractor-controlled.
- Ideal for large construction projects over $10 million.
- Simplifies claims and often reduces overall insurance costs.
What is Wrap-Up Insurance?
Wrap-up insurance, also called controlled insurance programs (CIP), is a centralized policy that combines multiple coverages for large construction projects, protecting owners, contractors, subcontractors, and other stakeholders under one program. This approach reduces coverage gaps and streamlines claims management, especially on projects exceeding $10 million.
It typically includes general liability, workers' compensation, and other relevant coverages tailored to project needs, often implemented by either the project owner or general contractor.
Key Characteristics
Wrap-up insurance features several distinct elements that improve risk management and efficiency.
- Comprehensive Coverage: Combines commercial general liability, workers’ compensation, and often builders’ risk in a single policy.
- Control: Can be owner-controlled (OCIP) or contractor-controlled (CCIP), depending on who manages the program and purchases the insurance.
- Cost Savings: Bulk purchasing typically results in discounted premiums and reduced administrative expenses.
- Claims Simplification: Single insurer manages claims for all enrolled parties, reducing disputes and delays.
- Project Suitability: Best for large-scale construction projects, including those valued over $100 million or complex multi-phase developments.
How It Works
Wrap-up insurance consolidates various coverages into one policy that covers all enrolled parties on a construction site, eliminating the need for individual subcontractor policies. The controlling party—owner or contractor—procures and manages the program, which applies uniform terms and limits across the project.
This unified approach not only simplifies risk oversight but also ensures consistent safety standards and insurance compliance. Additionally, some wrap-ups extend coverage post-completion to address latent claims within statutes of limitations, providing ongoing protection.
Examples and Use Cases
Wrap-up insurance is widely used in industries requiring large-scale construction and development projects.
- Commercial Construction: High-rise projects or expansive developments benefit from owner-controlled programs for comprehensive risk management.
- Infrastructure: Contractor-controlled programs are common in highway or transit projects, where firms like Delta may indirectly benefit through infrastructure investments.
- Energy Sector: Large energy projects often utilize specialized wrap-ups; investors interested in this space can explore best energy stocks for exposure to companies involved in such developments.
- Financial Planning: Understanding insurance costs and risk transfer mechanisms is essential for those reviewing earned premium impacts on project budgeting.
Important Considerations
When implementing wrap-up insurance, carefully assess the choice between owner-controlled and contractor-controlled programs to align with project goals and management capabilities. Consider upfront costs and enrollment requirements, which may affect subcontractor participation and project timelines.
Additionally, ensure that excluded risks like commercial auto or employment practices liability are addressed separately. For investment professionals, familiarity with regulatory standards such as those from the NAIC can provide insight into insurance compliance and risk exposures within construction-related portfolios.
Final Words
Wrap-Up Insurance can significantly reduce risk and administrative complexity on large construction projects by consolidating multiple coverages into one program. To maximize benefits, compare owner-controlled and contractor-controlled options to see which aligns best with your project’s scale and management style.
Frequently Asked Questions
Wrap-Up Insurance is a comprehensive policy designed for large construction projects that bundles multiple coverages into a single program. It protects owners, contractors, subcontractors, and other parties from shared risks, simplifying claims and often providing cost savings.
Wrap-Up Insurance is usually controlled and purchased by either the project owner or the general contractor. Owner-Controlled Insurance Programs (OCIP) are managed by the owner, while Contractor-Controlled Insurance Programs (CCIP) are managed by the general contractor.
Wrap-Up Insurance commonly includes commercial general liability, workers’ compensation, excess liability, builders’ risk, professional liability, and pollution liability. These coverages protect against bodily injury, property damage, environmental risks, and professional errors during and after construction.
Wrap-Up Insurance is typically best suited for large projects, often those exceeding $10 million, with maximum efficiency seen in projects over $100 million. Some states, like California, have thresholds as low as $3 to $5 million.
Wrap-Up Insurance eliminates coverage gaps between individual policies, simplifies the claims process by consolidating risks under one program, and often results in higher coverage limits and cost savings for all enrolled parties.
Common exclusions include commercial auto coverage, surety bonds, employment practices liability, off-site contractors, and third-party non-enrolled parties, who must obtain separate insurance policies.
An OCIP (Owner-Controlled Insurance Program) is purchased and managed by the project owner, providing them oversight of coverage, while a CCIP (Contractor-Controlled Insurance Program) is purchased and managed by the general contractor, typically focusing on liability and workers’ compensation for subcontractors.
Yes, through rolling wrap-up programs like ROCIP or RCCIP, which provide continuous coverage across multiple projects and can be adjusted as needed, making them ideal for developers or contractors with ongoing work.
