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History and Future of Subcontractor Default Insurance

Dan Faltermeier, Lockton Companies, closed the day’s sessions by reviewing the Subcontractors Default Insurance, its history, and future as more carriers have entered the market. SDI is an alternative to bonding and insures payments from subcontractors. Zurich had been the sole provider until 2010 when Arch entered the market but focused mainly on smaller general contractors. Since then, XL and Cove have entered the market offering new policy enhancements, forcing Zurich to revise its underwriting policy. While SDI remains and is widely accepted by the construction industry owners and financial institutions, its demand will continue to increase. Faltermeier noted, “While more carriers will continue to enter the SDI market, we may see future mergers or consolidation of carriers as a result of economic downturn. The bottom line is that more competitors are better for general contractors, offering more options for risk management when a subcontractor defaults.”

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