Contractors Grapple With Employee Suicide Risk
Though it may come as a surprise to some, the construction industry is among the top nine occupations with the highest risk for suicide, according to the Bureau of Labor Statistics.
“The construction industry tends employ a lot of what we call “double jeopardy men” — men with a number of suicide risk factors who are also the least likely to see help on their own,” said Sally Spencer-Thomas, co-founder and chief executive of the Carson J Spencer Foundation in Denver.
The foundation, in partnership with Denver construction firm RK Mechanical Inc. and the National Action Alliance for Suicide Prevention, in September jointly released a suicide prevention guide, “A Construction Industry Blueprint: Suicide Prevention in the Workplace.”
“Employers are learning to make suicide prevention a priority within their health and safety initiatives,” Spencer-Thomas said. “In shifting from reaction to prevention, company leaders become far more proactive in providing skill-based training, linking distressed employees to helpful resources, are creating a culture of care.”
“It’s the quiet ones you have to worry about slipping through the cracks.” — Cal Beyer, director of risk management, Lakeside Industries Inc.
According to the guide, construction workers are also at higher risk for suicide because they have access to and familiarity with lethal means like firearms, pills and high places, and are often less afraid and more capable of self-inflicted harm by these means.
The construction workplace also tends to have a culture of recklessness, bravery and/or stoicism, in which people are rewarded for being tough and thus, are often less likely to reach out and ask for help.
Construction workers also have increased exposure to physical strain or psychological trauma; a culture of substance abuse; exposure to isolation if they work on temporary out-of-town projects; and increased exposure to humiliation if they fail on their job, among other risks.
The guide recommends that construction firms should instill a culture that promotes the importance of safety; emphasizes teamwork; increases employee engagement and connectedness; values mental health; provides access to insurance and mental health care, such as those through employee assistance programs; provides informational support systems, such as buddy systems; and provides leadership and supervisor training.
“It’s the quiet ones you have to worry about slipping through the cracks,” said Cal Beyer, director of risk management at Lakeside Industries Inc. in Issaquah, Wash. “At our firm, we’ve adopted a safety 24/7 culture, teaching safety at home, work and play. Safety is a core value for us, and mental health and suicide prevention 24/7 is just as important.”
The topic of suicide used to be taboo in the industry, Beyer said.
“We used to talk about mental health awareness, but construction managers and field supervisors said that was too amorphous of a term,” he said. “They feel they can’t do anything about mental health awareness, but if we call it suicide prevention, then they ask what can they do to help.”
With the aid of the Denver foundation in conjunction with the National Action Alliance for Suicide Prevention, Beyer has been leading a grassroots campaign among “enlightened” contractors to create awareness, advocacy and action for mental health and suicide prevention.
He has started a LinkedIn group along with colleagues in the Construction Financial Management Association, and they are now starting to schedule construction industry outreach presentations for 2016 via seminars, workshops and webinars.
For example, the Associated General Contractors of Washington will sponsor a presentation in February, and the AGC of Oregon has scheduled a presentation for June.
Understanding Red Flags
A number of construction executives explained how they are incorporating suicide prevention measures within their health and safety programs.
“First, acknowledge and embrace the fact that your work culture has the power to make a difference in the lives of your employees,” said Heather Gallien, RK’s director of marketing and communications.
“Accept that it’s an honor to take on the responsibility of looking out for the mental health and well-being of your workers. Decide to be a leader in affecting change in an industry that’s at high risk for suicide.”
Second, contractors should adopt guidelines, such as those from the foundation, and then take time with management to gain an understanding of work culture “red flags” and create an action plan to mitigate them, Gallien said.
“Furthermore, ask your management teams to start talking about mental health issues openly and transparently,” she said. “Ask them to make it okay for employees to do the same.”
There are tactical conversations and tools a company can adopt, but the most important factor is that those at the top talk about their own issues — when appropriate, added RK’s chief operations officer Jon Kinning. Managers should also model for their employees, especially men, that work is a safe environment to bring up personal concerns and to ask for help.
David James, chief financial officer at FNF Construction Inc. in Tempe, Az., said that, while the firm has an employee assistance program, the key is to make employees aware of services available and eliminate the stigma so often associated with mental health issues.
The EAP is a good starting point, but additional direction from management is critical to provide employee education and hands on support to at-risk employees.
“We used to talk about mental health awareness, but construction managers and field supervisors said that was too amorphous of a term. … but if we call it suicide prevention, then they ask what can they do to help.” — Cal Beyer, director of risk management, Lakeside Industries Inc.
“One such group ‘at risk’ are those employees suffering through recovery from workers’ compensation injuries,” James said.
“FNF has had a long-standing philosophy to manage workers’ compensation cases with hands-on management, including regular communication, activities to support recovery and return-to-work programs. The caring attitude for such cases, and efforts to keep employees within the FNF family helps reduce the vulnerability of our workforce.”
Patrick Monea, vice president and chief financial officer at Granger Construction Co. in Lansing, Mich. said that suicide prevention is not an issue that his firm is currently focused on, but given the industry statistics, management now feels it is an issue “we have to strongly address.”
“Given the inherent stress of our industry and the associated culture, we feel the need to move toward education and prevention,” Monea said.
Granger’s human resources manager Matt Bozung added: “We must talk about mental health and suicide prevention openly and not ignore them as real issues. Further, recognition that specified training beyond basics, like stress management, is needed.”
Speed and Savings
The dilemma of limited public sector budgets and crumbling infrastructure may have found a cure. The state of Pennsylvania took advantage of recent developments by surety bond underwriters to help secure an aggressive program to replace bridges around the state.
Surety bonds are required for work done by government entities, but this is a public-private partnership, so letters of credit were an option. But the sponsor, the state Department of Transportation (PennDOT), decided to use a surety bond program using new elements that included a fixed claims-determination process, and also liquidity provisions to ensure that work could continue during a claim.
The Rapid Bridge Replacement Project (RBR) is addressing 558 structurally deficient bridges across the commonwealth under a design-build-finance-maintain public-private partnership (P3) arrangement between PennDOT and Plenary Walsh Keystone Partners — the joint venture concessionaire, owned 80 percent by Plenary Group USA and 20 percent by Walsh Investors.
“This feature, which is more seen with contractor performance bonds in Europe, reduces the period of uncertainty in relation to a claim from a surety and for that reason it is assessed in a positive way from rating agencies and lenders.” — Michael R. Bonini, director, Public-Private Transportation Partnership Office, PennDOT.
Plenary Walsh is responsible for demolishing the existing bridges, maintaining traffic during construction, and then maintaining the new bridges for 25 years following construction. PennDOT will retain ownership of the bridges throughout.
It is the largest road project in Pennsylvania history.
Most of the bridges included in the program range from 40 to 75 feet in length and are located in rural regions on the state highway system.
The RBR is the first project to be completed under Pennsylvania’s 2012 P3-enabling legislation.
PennDOT said it chose the P3 structure to accelerate the replacement of the bridges and facilitate efficiencies in design and the construction of bridge components. This has resulted in a 20 percent cost savings over the life of the concession period, compared to PennDOT’s replacing the bridges itself, according to the agency.
Substantial completion of the project is expected on Dec. 31, 2017. Total cost is $1.119 billion; the design-build contract is for $899 million.
PennDOT said the batching of the projects will allow the bridges to be replaced and maintained at an average cost of $1.6 million each versus $2 million each if completed by PennDOT.
Commercial close occurred on Jan. 9, financial was March 18. Construction on the first bridges began this summer, and the bridges will be completed in batches. Substantial completion of the project is expected on Dec. 31, 2017. Total cost is $1.119 billion; the design-build contract is for $899 million.
“The key feature of the performance bond used for the Rapid Bridge Replacement project that is different from more traditional ones is that it spells out a specific process about accepting claims, dispute resolution and how long such a process can take,” said Michael R. Bonini, director of the Public-Private Transportation Partnership Office at PennDOT.
“This feature, which is more seen with contractor performance bonds in Europe, reduces the period of uncertainty in relation to a claim from a surety and for that reason it is assessed in a positive way from rating agencies and lenders.
“For PennDOT, this means a more streamlined process in relation to timely completion of the project and access to this mechanism if the contract is terminated and the design-build contract is assigned to PennDOT.”
New Delivery Method
Surety bonding is “in a state of rapid development,” said Michael Bond, head of surety for Zurich, which was a participating surety in the RBR. “This is a new delivery method in the U.S.
“The enabling legislation for P3 programs does not necessarily specify surety as opposed to letters of credit or other forms of performance security. Letters of credit have been used worldwide to provide liquidity to a project, but they don’t protect subcontractors.
“Performance bonds also cover payments for labor and materials. That ensures workers and suppliers are covered.”
“The Pennsylvania program is a very creative example of how the public works and surety industries are responding to current needs.” Michael Bond, head of surety, Zurich
Bond said that the innovations in the RBR program address some of the prevailing concerns about surety, namely the uncertainty of the claims process, and the possibility of untimely payments, that could cause a liquidity problem for the project.
“The Pennsylvania program is a very creative example of how the public works and surety industries are responding to current needs,” said Bond.
To be clear, the surety bonds are different from the public-works bonds or funding bonds that are issued by the state authority and actually pay for the project.
The surety bonds provide performance security that the concessionaire, Plenary Walsh in this case, will complete the project satisfactorily. If there is a default, there would be a call on the bond and the surety would step in to work with the authority and the contractors to complete the project.
“What is new and different is that in a traditional public-works project the government is the owner and counterparty to the contractor,” said Bond. “In the P3 model, the counterparty is a private entity created to execute the project.”
He added that while such a special-purpose entity has some advantages over traditional public-works operations, it also has some proscriptions. Notably, the project is funded on a limited-recourse basis, so if there are cost escalations or unforeseen expenses, the concessionaire cannot dip into the government pockets to cover. There is some contingency, but it is limited.
“This is the next level in construction [risk management],” said Doug Wheeler, regional managing director for construction services at Aon Infrastructure Solutions. Aon was the broker for the contractor.
A European Model
“This alternative project delivery model came out of Europe and into Canada, then into the U.S. There is more legwork up-front, but there are dozens of projects already on board. Pennsylvania is a big proponent, New Jersey is almost there [with enabling legislation], but Governor Christie vetoed the most recent proposal. In New York, there has been a push.”
This is a very exciting time in public works and surety, said Aon’s Grace Drinker, senior analyst of infrastructure.
She stressed that even though the P3 process is different than the traditional design-bid-build approach, “there are still checks and balances aplenty in P3. There have been P3 contracts cancelled because of oversight and scrutiny.
“There is no risk to public safety or the public purse in the P3 process,” Drinker said. “What it does is bring operating efficiency to infrastructure.”
With the P3 approach, she said, “it is possible to have a higher initial cost, but the operating efficiency over the 30-year lifecycle of a project is a net savings. There is a real value for money in this.”
Drinker added that “contractors prefer to use surety capacity to letters of credit capacity to meet lender requirements on projects.”
Wheeler concurred that contractor preference is a big piece of the puzzle. “Surety is more efficient for the construction industry.” He added that capacity in surety is finite, but not a concern.
“Bundling the bridges allows them to be replaced faster and cheaper,” said Steve T. Park, senior associate with Ballard Spahr in Philadelphia, the bond counsel to PennDOT.
“The typical design-bid-build process would have taken longer. They selected bridges that could be easily bundled, designs that were similar, so they could fix the most in one program.”
There was equal diligence on the other side of the table.
“We spent a lot of time de-risking the program,” said Sarah Roberts, president of Intech Risk Management, insurance advisers to the concessionaire.
“We spent a lot of time de-risking the program.” — Sarah Roberts, president, Intech Risk Management
“When people hear 558 bridges, the initial perception is that they were not certain it could succeed. But the project is actually easier to manage with a lot of bridges than it would be for a single project of the same size.
“With a single project, if there is a delay, the whole timeline is thrown off. With so many bridges, it is possible to swap out one for another and work around delays to keep the whole project on schedule.”
She is sanguine about the growth potential for P3 projects in the U.S., at least in the long term.
“I don’t think we are there yet in P3 in the U.S.; there is still a lot of coming of age to do. In this case, the P3 model had a direct benefit to the owner, PennDOT, and indirectly to the taxpayers of the state.”
Lynn Schubert, president of the Surety & Fidelity Association of America, confirmed that P3s, and most public construction in Europe are protected by letters of credit.
“In the U.S., our public construction prefers performance bonds for completion and payment. But the concern of the ratings agencies is the speed with which surety bonds are called upon.
“In the Pennsylvania [project], the contracts include a quick-resolution process. It is a little extra piece, but it is very exciting.”
7 Questions to Answer before Choosing a Captive Insurance Domicile
Risk managers: Do your due diligence!
It seems as if every state in America, as well as many offshore locations, believes that they can pass captive legislation and declare, “We are open for business!”
In fact, nearly 40 states and dozens of offshore locations have enabling captive insurance legislation to do just that.
With so many choices how do you decide who is experienced enough to support the myriad of fiscal and regulatory requirements needed to ensure the long term success of your captive insurance company?
“There are certainly a lot of choices,” said Mike Meehan, a consultant with Milliman, an actuarial firm based out of Boston, Massachusetts, “but not all domiciles are created equal.”
Among the crowd, there are several long-standing domiciles that offer the legislative, regulatory and infrastructure support that makes captive ownership not only a successful risk management tool but also an efficient entity to manage and operate.
Selecting a domicile depends on many factors, but answering these seven questions will help focus your selection process on the domiciles that best fit your needs.
1. Is the domicile stable, proven and committed to the industry for the long term?
The more economic impact that the captive industry has on the domicile, the more likely it is that captives will receive ongoing regulatory and legislative support. The insurance industry moves very quickly and a domicile needs to be constantly adapting to stay up to date. How long has the domicile been operating and have they been consistent in their activity over the long term?
The number of active captive licenses, amount of gross premium written in a domicile and the tax revenue and fees collected can indicate how important the industry is to the jurisdiction’s bottom line. The strength of the infrastructure and the number of jobs created by the captive industry are also very relevant to a domicile’s commitment.
“It needs to be a win – win situation between the captives and the jurisdiction because if not, the domicile is often not committed for the long term,” said Dan Kusalia, Partner with Crowe Hortwath LLP focused on insurance company tax.
Vermont, for example, has been licensing captives since 1981 and had 589 active captives at the end of 2015, making it the largest domestic domicile and third largest in the world. Its captive insurance companies wrote over $25 billion in gross written premiums. The Vermont State Legislature actively supports an industry that creates significant tax revenue, jobs and tourist activity.
2. Are the domicile’s captives made up of your peer group?
The demographics of a domicile’s captive companies also indicate how well-suited the location may be for a business in a particular industry sector. Making sure that the jurisdiction has experience in the type and form of captive you are looking to establish is critical.
“Be among your peer group. Look around and ask, ‘Who else is like me?’” said Meehan. “Does the jurisdiction have experience licensing and regulating the lines of coverage for other businesses in your industry sector?”
3. Are the regulators experienced and consistent?
It takes captive-specific expertise and broad experience to be an effective regulator.
A domicile with a stable and long-term, top-tier regulator is able to create a regulatory environment that is consistent and predictable. Simply put, quality regulation and longevity matter a lot.
“If domicile regulators are inexperienced, turnaround time will be slower with more hurdles. More experience means it is much easier operating your business, especially as your captive grows over time,” said Kusalia.
For example, over the past 35 years, only three leaders have helmed Vermont’s captive regulatory team. Current Deputy Commissioner David Provost is one of the longest tenured chief regulators and is a 25-year veteran in the captive insurance industry. That experienced and consistent leadership enables the domicile to not only attract quality companies, but also to provide expert guidance on the formation process and keep the daily operations running smoothly.
4. Are there world-class support services available to help manage your captive?
The quality of advisors and managers available to assist you will have a large impact on the success of your captive as well as the ease of managing the ongoing operations.
“Most companies don’t have the expertise to operate an insurance company when you form a captive, so you need to help build them a team,” Jeffrey Kenneson, a Senior Vice President with R&Q Quest Management Services Limited.
Vermont boasts arguably the most stable and experienced captive infrastructure in the world. Many of the leading captive management companies have their headquarters for their Global, North America and U.S. operations based in Vermont. Experienced options for captive managers, accountants, auditors, actuaries, bankers, lawyers, and investment professionals are abundant in Vermont.
5. Can the domicile both efficiently license and provide on-going support to your captive as it grows to cover new lines of coverage and risks?
Licensing a new captive is just the beginning. Find out how long it takes for the application to get approved and how long it takes for an approval of a plan change of your captive’s operations.
A company’s risks will inevitably change over time. The captive will need to make plan changes which can include adding new lines of business. The speed with which your domicile’s regulatory branch reviews and approves these plan changes can make a critical difference in your captive’s growth and success.
The size of a captive division’s staff plays a big role in its speed and efficiency. Complex feasibility studies and actuarial analyses required for an application can take a lot of expertise and resources. A larger regulatory team will handle those examinations more efficiently. A 35-person staff like Vermont’s, for example, typically licenses a completed application within 30 days and reviews plan changes in a matter of days.
6. What are the real costs to establishing and managing your captive?
It is important to factor in travel costs, the local costs of service providers, operating fees, and examination fees. Some states that do not impose a premium tax make up for it in high exam fees, which captives must be prepared for. Though Vermont does charge a premium tax, its examination fees are considered some of the least expensive options in the marketplace.
It is also important to consider the ease and professionalism of doing business with a domicile in the ongoing operations of your captive insurance company.
“The cost of doing business in a domicile goes far beyond simply the fixed cost required. If you can’t efficiently operate due to slow turn-around time or added obstacles, chances are you have made the wrong choice,” said Kenneson.
7. What is the domicile’s reputation?
Make sure to ask around and see what industry experts with experience in multiple domiciles have to say about the jurisdiction. Make sure the domicile isn’t known for only licensing certain types of captives that don’t fit your profile. Will it matter to your board of directors if your local newspaper decides to print a story announcing your new insurance subsidiary licensed in some far away location?
Are companies leaving the jurisdiction in high numbers and if so, why? Is the domicile actively licensing redomestications — when an existing captive moves from one domicile to another? This type of movement can often be a positive indicator to trends in a domicile. If companies of a particular size or sector are consistently moving to one state, it may indicate that the domicile has expertise particularly suited to that sector.
Redomestications made up 11 of the 33 new captives in Vermont in 2015. This trend is a positive one as it speaks to the strength of Vermont. It reinforces why Vermont is known throughout the world as the ‘Gold Standard’ of domiciles.
Asking the right questions and choosing a domicile that meets your needs both today and for the long term is vital to your overall success. As a risk manager you do not want surprises or headaches because you did not ask the right questions. Do the due diligence today so that you can ensure your peace of mind by choosing the right domicile to meet your needs.
For more information about the State of Vermont’s Captive Insurance, visit their website: VermontCaptive.com.
This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with the State of Vermont. The editorial staff of Risk & Insurance had no role in its preparation.