BRP Program Overview

Presentation

Who is Coventry Risk Specialty, LLC

Coventry Risk Specialty, LLC is a Managing General Agent representing Gotham Insurance Company (AM Best Rating A IX) and Lloyds of London at A - XV. The program is written on a non-admitted basis.

Key Individuals of Coventry Risk Specialty Dan Swain – Underwriting Manager Dswain@coventryrisk.com Randy Roppelt – President Rroppelt@coventryrisk.com

Key Element of the Builders’ Reporting Policy

Due to the financial burden imposed upon today’s builder in this recessed economy, cash flow has become paramount. Our solution for Commercial or Residential General Contractor is the Builder's Reporting Program (BRP). The BRP Program is designed to provide an affordable insurance product that provides the builder with protection of a Designated Project on a “pay as you build basis”.

The Builder’s Reporting Policy (BRP) is a multi-section liability insurance form that is to be offered to residential & light commercial general contractors and developers for designated Projects (site specific developments) and Wrap-Ups. It has been constructed to provide separate coverage sections and premium rating for Premise Operations and Completed Operations and combine the sections into a single master policy form.

The builder will initially pay only the Premise Operation premium at policy inception. This coverage protects the builder for third party claims that could occur arising from the scheduled structure during the course of construction and the subsequent sales period.

Upon the sale of the scheduled home/unit the builder should have the sale’s funds available to pay for the Completed Operations and Warranty. Completed Operations coverage is provided on a per structure basis and is triggered by:  

A) reporting the sale of the home/unit including final sale price andB) receipt of the premium payment for Completed Operations  C) receipt of the payment for the qualified warranty andD) issuances of the policy endorsement.  The bottom line to the builder is that the builders out flow of personal funds is minimized and that the majority of the CGL policy & warranty cost will come from funds received by the builder from the sale of the home to the home buyer.

Why the BRP Program

Cash flow advantage to Builder /PolicyholderDeposit CGL premium is only for Course of Construction coverage.Builder is fully protected while the structure(s) are being built PAY AS YOU BUILD feature allows Builder/Policyholder to only

pay for Completed Operations coverage and Structural Defect Warranty Coverage at time of sale (pay us when you get paid)

Most CGL policies require full payment to bind coverage. As such builder is forced to borrow/finance the premium and pay interest on a monthly basis regardless of progress of the project.

BRP Coverage advantage to Builder/Policyholder

Completed Operations Coverage for length of State Mandated Liability (no need to purchase additional policies for continuous coverage)

This typically matches the required warranty 10 years Structural coverage

Coverage for Repair work available after structure is completed and sold/transferred

CGL coverage in the event there is a claim arising from the repair of a scheduled home

HBW- an Industry Leader in the Warranty Business is writing an Insurance backed Structural Defect Warranty coverage for every scheduled Home/Unit/Building

HBW 10 year or 2-10 structural warranty required on every scheduled structure (based on financing requirements or insured’s desire)

Broad CGL coverage 10 Year Subsidence (subject to compliance with

policy terms)Full Completed Operations Coverage for duration of

state required liability (subject to compliance with policy terms) 10 years of tail coverage

Competitors typically require you to purchase separate CGL tail coverage for up to 10 years to match builders liabilitySubsidence coverage and Completed Operations

coverage under the CGL requires the purchase of a 10 year Structural Warranty

Coverage for Repair work after the Structure is completed and sold/transferred

Wide range of eligible new construction projects Single Family DwellingsMultifamily DwellingsMixed Use Structures CondominiumsCommercial

Many competitors only offer terms for residential only

The BRP eligibility guidelines match the Home Builder Warranty Guidelines- so the Warranty and General Liability -Completed Operations go hand

in hand.

Nationwide territory ---excluding CO, NV, LA & NY

Policy Term - up to 48 months. Extensions available for up to an additional 24 months.

Low Minimum Premiums-as low as $7,500Most CGL policies require full payment at time of binding. BRP

only requires initial payment for the CGL covering the course of construction

High Policy Limits- Limits available  to

$5,000,000/$5,000,000/$5,000,000Most CGL policies only offer limits of $2,000,000/$2,000,000/$2,000,000; thus requiring Agent to purchase a separate Umbrella policy which is costly.

Competitively priced HBW warranty BRP requires a 10 year Structural warranty It is the intent of

the BRP program to have the combined CGL & warranty cost match our competitor’s cost of their CGL.

High commissions paid on all coverages –CGL, Builders Risk & Structural Warranty

The BRP is unique; it is our understanding that the BRP is the only builders program that pays the Agent a commission for the Structural Warranty.

2-10 HBW Overview• 2-10 Home Buyers Warranty (2-10 HBW) is the

nation’s leading provider of new home and commercial insurance-backed warranties. 2-10 HBW offers comprehensive and innovative products to homeowners, home builders, general contractors, and real estate professionals while applying unparalleled underwriting discipline and strict risk management controls. Since their inception in 1980 they have provided warranties on over 2.5 million new homes through 15,000 home builders and 3.5 million resale homes through 62,000 real estate professionals. They have a A+ rating from the Better Business Bureau.

Benefits of the 2-10 HBW Structural Warranty• Even the most prudent and professional builders are no match for

natural forces such as moving soils, which cause 80% of all structural damage claims. Soil movement causes more property damage in the U.S. than all other natural disasters combined (including earthquakes, tornadoes and flooding). And it only takes one large claim to sideline a thriving business. If you’re a homebuilder or general contractor, protecting yourself from the cost of a structural claim is simply good business. Key benefits of the Warranty include:

• Transfers the risk of loss due to structural damages to the insurer who covers the cost of repairs or replacements

• Increases buyers’ and owners’ confidence when they know the largest investment they may ever make is protected for a full 10 years

• Warranty is fully transferable to subsequent owners should your buyers decide to resell their home or light commercial building

• Gives you a competitive advantage to help sell homes, move inventory, and win commercial or remodeling bids

• Ensures that you can accept a buyer closing with an FHA loan

• Without a written warranty, there is no “filter” for owner complaints, claims or lawsuits. When you enroll your new homes in a 2-10 Home Buyers Warranty structural warranty program, qualifying structural damages are clearly defined, complaints and claims are handled professionally, and disputes are resolved in arbitration, a shorter and more cost effective process than litigation.

• Light commercial buildings and remodeling projects have a commercial or remodel specific warranty offering the same benefits and features.

Compare Warranty Benefits to Fire Coverage• For nearly 40 years, the 10-year insurance-backed warranty industry has

provided a service to homebuilders and their home buyers, enrolling more than 5,000,000 new homes. Out of these, a significant number of claims have been experienced. Since 1977 the 10-year insurance-backed warranty industry has paid out more than $1.1 billion repairing over 50,000 structural claims on behalf of builders participating in these programs. That is, 1% of new homes have experienced major structural damage as defined by the warranty over the 10-year warranty term. The average per structural claim cost in 2012 was $32,500.

• Compare this to the average frequency of another widely recognized catastrophic event, fire damage. According to data obtained from the National Fire Protection Association and the U.S. Census Bureau, an average of 1.1% of housing units would have experienced major fire damage over a ten year period. The average direct property loss to residential properties due to all reported fires in 2011 was $18,648. In other words the frequency and severity of major structural damages and major fire are comparable. No homeowner would do without fire insurance, and now by partnering with 2-10 HBW, Coventry Risk Specialty can provide builders protection against the risk of structural damages.

Competitive monthly reporting Builders Risk coverage available as part of BRP policy package

Advantages of the BRP policy package1. Single package policy containing CGL and Builders

Risk Coverages. 2. Simplified transference from COC to Completed

Operations Coverage.3. Builders Risk is optional and not required to

purchase the CGL. It is our understanding that our monthly reporting form is competitive and provides the builder with additional “cash flow”. Competitors issue stand alone policies (normally not the same carrier as the CGL). There is no cross-references to identify possible lapse in coverage issues.

In addition to our competitive BRP policy package we have also taken the additional steps to benefit our insureds

Partnerships with Construction Professional services to assist our Builder’s with:1. Risk Management Solutions2. Warranty Enrollment and Coverage3. Engineering Reviews of Projects (if required)4. Services provide by RLCH & HBW

24/7 Help Desk to resolve issues and avoid costly litigationThe help desk is designed to provide consultation services to the home owner & builder if there is a question or compliant. It is serviced by Network Adjusters

Submission Requirements• BRP Contractors questionnaire – can be

downloaded at: (http://www.coventryrisk.com/submissions/brp.html)

• Acord Application• Recent Soils Reports• Resumes of Officer/Owners • Project Plot Plan