Wrap-Ups are a powerful risk management tool.

Whether this is your first construction project or you’re a seasoned expert, finding the right insurance program is the key to the success of your project.

Traditionally, Project Owners require all of their Contractors to provide their own insurance in their bid. Under this method, the Project Owner keeps track of each Contractor’s insurance policies to ensure they have the proper coverage and do not have any insurance gaps.

A more popular insurance method is to implement a Controlled Insurance Program (CIP) on your project. A CIP, also known as a Wrap-Up, is a consolidation of insurance coverage for all project Contractors into one program. Implementing a Wrap-Up can aide in minimizing your overall insurance risk by ensuring each Contractor has the proper coverage under the program.

There are two main types of Wrap-Ups:

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OCIP: Owner Controlled Insurance Program
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CCIP: Contractor Controlled Insurance Program

Though similar, there are some specific differences, such as who is Sponsoring the program. In a CCIP, the General Contractor is the Sponsor. In an OCIP, the Owner is the Sponsor. The Sponsor is responsible for paying the premium and managing the program elements. Watch our video to learn more:

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The four key elements of a Wrap-Up:

Understanding how the Sponsor manages all the responsibilities for each element between a OCIP and CCIP will make it easier to determine the best Wrap-Up for you. Here are some differences between an OCIP and CCIP within each element:

  • When the insurance for a specific project is being designed the Sponsor selects an insurance Broker. Together they collaborate on which Wrap-Up is best suited for the project.

    • Most likely a pre-established Rolling Program – Carrier already selected
    • Contractor sponsors the program – First Named Insured controls who is enrolled in the program
    • Contractor negotiates coverage terms and limits
    • Contractor responsible for all administration
    • Contractor responsible for consistent contractual risk transfer between all documents
  • It’s important to decide who is going to be responsible for the project’s risk. Managing financial risk may involve a financial feasibility study as well as an evaluation of the project’s safety & loss control program.

    • Owner manages losses within the deductible up to an aggregate loss value
    • Owner Retains savings within the project loss fund
    • Large deductible program – Generally pass on some portion of deductible to the contractor
    • Actual savings/losses are not known until all claims are settled – this can be up to 10 years after project close
    • Upfront payment or collateral may be required for program max loss fund
    • Contractor retains financial risk on the project
    • Smaller to No Deductible – Pass down to trades
    • Owner can close books at the end of the project
    • Premium includes all costs (fixed and variable)
    • Owner has no risk on claims
  • The Wrap Administration team, often a Third Party Administrator (TPA) hired by the Sponsor, manages the monthly paperwork, enrolls Contractors into the program, and addresses daily questions. Working with a Broker such as TSIB—which has an in-house Wrap Administration team  —can provide additional cost savings.

    • Owner / Broker decides on coverage, insurers, retentions, deductibles
    • Owner / Broker develops all insurance and contractual documentation
    • Owner hires Administrator – Generally through the Broker
    • Administrator works directly with the Contractors
    • Contractor responsibility
    • Documentation already developed (CCIP Manual, Subcontracts, etc.)
    • Coordinated team in place (Contractor, Broker, Carrier, administrator)
    • Risk of program success lies with Contractor and Carriers
  • To help minimize the stress a claim can have, it’s important to create protocols that play a critical role in maximizing the potential savings within the loss fund. The sponsor often hires a TPA to manage these tasks.

    • Claims handled by a combination of Owner’s Broker and Carrier
    • Owner is directly involved in claims process
    • OCIP responsible for defense counsel qualification and selection
    • OCIP responsibilities may extend up to 5 or 10 years after project ends
    • Generally, contractor will have an in-house claims team working with carrier
    • Owner has no risk on claims
    • Pre-qualified counsel specializing in construction litigation
    • Most contractors have comprehensive Return-to-Work programs and Crisis Management protocols
    • Contractor responsible for 5 to 10 year tail period – Owner can close their books.
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