COVID-19 Construction Risk Management Issues at Airports
Updated: Feb 11, 2021
On February 2, 2021, Cathy Wells spoke at an Airports Council International (ACI) webinar on COVID-19 risk management issues involving construction projects at airports. Below is a summary of the salient points Cathy made in her presentation:
Construction projects at airports have continued to be very active despite the pandemic. In particular, there has been an increase in cargo construction projects. Overall, COVID-19 has had a low impact on airport construction due to the tight construction industry safety protocols in place. Nonetheless, some airports have experienced delays or postponement of projects. Some airports have attempted to trigger business interruption provisions under their property policies including builders risk policies. Unfortunately, most airports have been unsuccessful triggering coverage to recuperate losses stemming from loss of revenues.
The construction insurance market has been very tight. However, underwriters are taking a more favorable view of airport remodeling projects than they have in the past. Reasons stem from lower passenger traffic and opportunities to conduct work inside an airport facility with fewer third-party risks. Extensions on existing OCIP and CCIP policies have become very difficult to obtain even when the project losses are low. Renewals of OCIP and CCIP policies continue to evolve with reduction of coverage through onerous endorsements restricting coverage and higher retentions.
Predictions and recommendations on how to proceed in 2021 are based on the widely-held view in the insurance industry that the hard insurance market will continue for the foreseeable future. With that in mind, Cathy recommends that airport operators anticipate renewals well in advance and continue to develop relationships with their underwriters to get through difficult times. Consider re-evaluating risk financing strategies by taking a hard look at retentions, alternative risk transfer facilities such as captives, and challenge how construction risks are financed. Where OCIPs may have made sense in the past, they may not in a COVID-19 world given that OCIPs tie up capital for long periods of time. If you agree to have your contractor sponsor a CCIP, insist on full transparency of total costs and obtain copies of the policies to ensure your airport is properly covered.