Risks hurting builders in N.O.

• By TED GRIGGS
• Advocate business writer
• Published: Apr 17, 2008 - Page: 1D - UPDATED: 12:05 a.m.

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Major projects in the New Orleans area, such as Big Charity’s $1.2 billion replacement, can’t be done now because construction companies can’t buy enough insurance to protect themselves in the event of a hurricane, a construction industry official said Wednesday.

A construction firm can purchase $450 million in builder’s risk coverage, but only if the firm spreads the risk among insurers in Europe and the United States, said Warren Perkins, vice president of risk management for Boh Brothers Construction. As far as flood insurance goes, the coverage is limited to $35 million, and the policies carry a $1 million deductible.

Builder’s risk covers projects under construction, renovation or repair. The policies cover a variety of risks, such as vandalism and theft. Optional coverages for flood and “soft costs,” such as added interest expenses or a loss of income because a business’s opening is delayed, may also be purchased.

Perkins ticked off a number of proposed construction projects in New Orleans that may run into difficulties because of the limited coverage, such as the Trump Tower, $400 million; the St. Raymond Condos, $500 million; and a new riverfront hotel, $400 million.

The limited builder’s risk coverage was slowing New Orleans-area’s recovery and still is, Perkins said. But efforts to inform the insurance industry and the public about the flood protection efforts are helping.

Perkins was one of the speakers at a meeting on hurricane and flood protection efforts featuring the U.S. Army Corps of Engineers, the Governor’s Office of Coastal Activities and the Louisiana Department of Insurance.

Karen Durham-Aguilera, director of the Army Corps’ Task Force Hope, said since Hurricane Katrina more than $3 billion in federal funds have been spent in upgrading 350 miles of levees, flood walls and pumping stations in the five-parish area.

The corps expects to award $2.1 billion in contracts in 2008, she said. By 2012, the estimated $14.6 billion protection system will be able to handle a 100-year flood, or the kind of flooding that has a 1 percent chance of occurring each year.

Insurance Commissioner Jim Donelon said the New Orleans area is better protected from flooding than it was before Hurricane Katrina.

As a lifelong resident of “the Bowl,” Donelon said he has seen every day the work being done to improve the levees, the flood walls and pumping stations.

“I believe it truly is a good news story,” Donelon said.

Perkins said he is taking part in programs like the joint meeting in order to get word out about the progress being made.

“We need to educate the (insurance) markets on what’s going on in our city or we won’t be able to do project one,” Perkins said.