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Federal, state and local governments are unable to meet the funding demands required to improve the U.S. infrastructure system. Current governmental funds generated and earmarked for infrastructure total some $100 billion, while many experts predict the annual cost to stabilize, improve and maintain the nation's infrastructure will require some $225 billion annually over the next 50 years--far short of the need.

In the past, the gasoline tax--which is assessed by the gallon--was the main source of highway and transportation funding. Now, with more Americans driving less or using more fuel-efficient cars, less money is available to fund public infrastructure.

As a result of this renewed focus on the dire state of infrastructure in the U.S., more public-private partnerships are being formed to address the issue. The P-3 approach, as it's often called, allows for private capital to be invested in public project construction in return for future income after construction completion, during the ownership and maintenance phase.

This approach presents shared contractual relationships among the project stakeholders and warrants specific attention to risk management and insurance.

Recognizing the need for tailored risk management and insurance solutions to respond to the entire life cycle of P-3 projects, Lexington Insurance Company, a unit of AIG Commercial Insurance, recently introduced Lex P-3 Solutions--tailored risk management and insurance products that respond to the risks associated with public private partnerships throughout the life of the project.

"Public private partnerships have been used successfully for years in Europe, Asia, Latin America and Canada," says Tom Grandmaison, vice president, construction liability, product line manager, at Lexington Insurance. "Currently, 30 to 35 states have legislation in place that allows for the formation of public private partnerships. The hope is that these partnerships will help close a significant portion of the funding gap for public infrastructure construction projects."

Lexington's P-3 Solutions coverage addresses risks starting with the design and construction phase and continues through the operational phase of a project, and can include professional liability, general liability, excess liability, and builders' risk during construction.

Upon completion of the project, Lex P-3 Solutions can provide property insurance and operational general liability during the ownership and maintenance phase. The coverage protects project owners, concessionaires, financiers, contractors, engineers, and other design professionals.

All of the P-3 Solutions coverages are available on a stand-alone basis or on a combined policy form. Workers' compensation, environmental liability, surety, and additional excess capacity can be facilitated through other AIG companies.

Lexington's involvement in a project starts with an intensive risk assessment process and, once coverage is bound, continues with project-specific risk management advice and claims management/resolution programs. Lex P-3 Solutions builds upon Lexington's history in the construction and property markets, and leverages an experienced team of underwriting, risk management, claims, and legal counsel to facilitate a quality and efficient insurance program.

(The above piece is part of our continuing Insights series designed to highlight key products and services to our readers. This paid-for Insights was written and edited by Risk & Insurance® on behalf of our marketing partner. Additional Insights can be found on our Web site at www.riskandinsurance.com/.)

October 9, 2008

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