STAFF WRITER – The Ontario Construction Report Special Report
Backed by more than 72,000 colleagues in more than 120 countries, Aon is a leading global provider of risk management and insurance products. Serving 12 of the 15 largest general contractors in Canada, as well as more than 2,500 other clients across a range of industries and including a range of sizes, Aon’s access to industry knowledge and talent is second to none.
David Bowcott, senior vice president and national director large/strategic accounts, construction and infrastructure services, says Aon uses that industry knowledge, its market share and its construction experience to benefit all of its clients. “We can create an anonymized peer group for our clients based on their market segment and their size, and then use the data from that peer group to identify strengths and weaknesses through benchmarking.”
Bowcott says Aon can benchmark both annual/practice policy information, including general liability or contractors’ equipment, and project specific policies such as builders’ risk, property, wrap-up liability, project specific professional, and performance security (subcontractor default insurance and surety). In addition, he says Aon can even benchmark operational practices utilized by contractors to manage risk.
Categories that can be benchmarked from an operational standpoint include go or no go practices, subcontractor/supplier prequalification, quality assurance/quality control, and safety. Bowcott says: “We can also benchmark claims information to help clients quantify the risks they face on their projects and to assist in the brokerage strategy to the insurance/ performance security marketplace.”
Aon’s involvement with some of the largest general contractors, and therefore largest projects in the world, means the company also has access to insights about new technologies and project delivery models that tend to happen first in the larger project space.
“We were among the first involved with Public-Private-Partnerships for instance,” he said. “In this space, our biggest contribution was assisting clients in putting forward performance security solutions which would offer the project finance stakeholders the security they needed to extend credit, and at the same time not constrain the contractor’s balance sheet by using traditional lender prescribed performance security like letters of credit.”
Solutions Aon has pioneered, he says, included working with EDC (Export Development Canada) to “give the market domestic access to EDC’s back-to-back letter of credit guarantee instrument (PSG), utilizing subcontractor default insurance as a third party performance security solution, and most recently, working with the surety industry and the project finance community to come up with liquid surety solutions that can replace letters of credit at terms acceptable to the contractor community.”
Bowcott says, as Aon respects developing innovation, “our contractors not only want to know what their options are, they also want to know that when a suitable option doesn’t exist, we have the ability to bring one to the market.”
Other innovations have included inherent defect or postconstruction defect insurance, weather insurance and other enhancements to traditional products including more broad and clear coverage under all relevant policies for impact costs related to covered risk under the policy.
“Our access to large national and global markets also means we have insights into trends that are happening or may be happening. Changes in delivery models including the growth of IPD (integrated project delivery or alliance contracting) and CM at Risk (construction management at risk) or two-tiered tendering, require creative thinking and new ways of looking at risk.”
Bowcott says new project delivery models are putting contractors in a more important role with owners. “We’re seeing trends in asset management in which the contractor has the greatest knowledge of how to effectively run an asset from design build, through operations (a whole-life approach). This is a good role for the contractor but means they must be more aware of potential exposure given the increased transfer of risk.”
To help contractors navigate this expanded role, Aon relies on its team of experts whose experience in total cost of ownership procurement, project finance and engineering/ construction, to ensure its clients are successful in these new markets. He says Aon is also looking at expanding its base of experts in cutting edge technologies to support the rapid advances in vertical and horizontal building technology. “The trick is to have all the talent under one roof to both manage the risk the client sees, and to identify and manage what they don’t.”
Bowcott says Aon also helps its clients, of all sizes, compete in a global marketplace. “When you consider that 50 to 55 per cent of all construction happening in the world is being done by European contractors, but that little of it is actually taking place in Europe, you can understand why several of our clients are becoming very familiar with the players in the European construction marketplace.” He says contractors must be prepared to vet potential project partners and be more savvy when it comes to picking partners.
In order to stay on the cutting edge of trends in the construction sector, Bowcott says Aon is working hard to stay close, not only to its contractor clients, but owner clients as well.
Aon was a founding member of the Canadian chapter of the Institute for Asset Management (IAM), and is heavily involved in other global associations in which owners are devising new ways of procuring and operating their assets. Through this involvement, Aon is anticipating future procurement trends and positioning its clients for the future of the construction industry.
For more information about Aon, visit www.aon.com.