Insuring the Rebuilding of America: What’s in the $1.2 Trillion Infrastructure Law? What Will It Mean for the U.S. Economy?

(DESCRIPTION)
Joan Woodward in a video window in the upper right corner. Text, Wednesdays with Woodward (registered trademark) Webinar Series. Travelers Institute, Travelers.

(SPEECH)
Hello. Good afternoon and thank you for joining us today. I'm Joan Woodward, and I'm honored to lead the Travelers Institute, which is our public policy and educational arm of Travelers. Welcome to Wednesdays with Woodward, a webinar series where we convene leading experts for conversations about today's biggest challenges.

Today, we're going to talk about the new infrastructure law and what it might mean for our economy and your business. As always, we'll be sending out the replay of this program over the next few days to everyone who registered and posting it to our website, travelersinstitute.org.

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About Travelers Institute Webinars. The Wednesdays with Woodard educational webinar series is presented by the Travelers Institute, the public policy division of Travelers. This program is offered for informational and educational purposes only. You should consult with your financial, legal, insurance or other advisors about any practices suggested by this program. Please note that this session is being recorded and may be used as Travelers deems appropriate.

(SPEECH)
So before we get started, I'd like to share our short disclaimer about today's program.

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Insuring the Rebuilding of America: What's in the $1.2 Trillion Infrastructure Law? What Will It mean for the U.S. Economy? Logos for American Property Casualty Insurance Association, University of South Carolina Darla Moore School of Business, Travelers Institute, Travelers, American Trucking Associations, Metro Hartford Alliance.

(SPEECH)
And as always, we're thrilled to be joined by our partners today. So a huge thanks for their collaboration, and a special welcome to all their members joining. So now let's get started. After years of talk about infrastructure week, many infrastructure investments will finally become a reality in the United States over the next several years.

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A pie chart. Text, Breakdown of Infrastructure Law. Reconnecting communities $1 billion, Roads and Bridges & Major projects, $110 billion. Railways $66 billion. Power Infrastructure $65 billion. Broadband $65 billion. Water Infrastructure $55 billion. Resiliency and Western Water Storage $50 billion. Public Transit $39 billion. Airports $25 billion, Environmental Remediation $21 billion, Ports and Waterways $17 billion, Road Safety $11 billion, EV Charging Stations $7.5 billion, Electric Buses, ferries $7.5 billion.

(SPEECH)
This new law includes massive and historic investments. $110 billion, the largest investment ever in roads and bridges in a half of a century.

39 billion for public transit, 55 billion in clean drinking water and wastewater infrastructure, all of the largest investments in these sectors in American history. 17 billion in funding for ports and waterways, especially important now with our supply chain issues, 25 billion for airport upgrades, 65 billion for broadband infrastructure, and 66 billion for railways.

This is the single largest investment in the U.S. has ever made to address climate change as well, including funding for low emission, buses and ferries, and for funding a nationwide network of electric vehicle charging stations. This is a new thing for us in the United States.

The November Bill, signed by President Biden, was just the beginning, and now there will be a multi-year process which has begun. Next up, implementing this law. Federal agencies, such as the Department of Transportation, and the Department of Energy, are now tasked with getting money out the door fast.

State and local agencies who own and run most of our infrastructure are going to begin planning, designing, and building. And we know there's shove-ready projects out there, and we're going to talk about those. All of these projects will need protection against loss, damage, and liability, and that's of course where we come in with insurance.

So today, we'll have a 60-minute-deep dive into this new infrastructure law, what comes next, what it means for your business, and I'm pleased to be joined by three top experts in this area.

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Photos and text, Speakers. Joan Woodward, Executive Vice President, Public Policy; President, Travelers Institute, Travelers. Chris Spear, President & CEO, American Trucking Associations, Ed Mortimer, Vice President, Transportation and Infrastructure, U.S. Chamber of Commerce, Bob Raney, Senior Vice President, Bond & Specialty Insurance, Construction Services, Travelers

(SPEECH)
So first, Chris Spear, representing 8 million working men and women in the trucking industry.

Passage of a comprehensive Infrastructure Investment Bill has long been a tier 1 priority for the trucking associations, which comprise about 34,000 motor carriers and suppliers across the U.S. In recent years, Chris and ATA members have testified 24 times on Capitol Hill urging greater investment in roads and bridges.

Next up we have Ed Mortimer. He's the Vice President of Transportation and Infrastructure for the US Chamber of Commerce, where he oversees the development and implementation of the Chamber's transportation infrastructure policy. Infrastructure investment has been a priority for the Chamber for decades. And his team have done a really terrific job to influence how the Infrastructure Bill became a reality.

And lastly, certainly not leastly, my colleague and friend, Bob Raney is head of Travelers' Bond & Specialty Insurance, Construction Services, where he oversees construction surety products. That's a tongue twister, Bob. As we'll hear today from him, insurance and surety have an important role in all of these infrastructure investments. And so now, I'm really pleased to turn over the virtual floor to ATA President, Chris Spear.

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Woodward and Spear on screen together, then Spear alone.

(SPEECH)
Chris.

Well, thank you, Joan, for moderating today's panel, and I'm really grateful to be part of this timely discussion. Infrastructure has been and remains a centerpiece. It's a tier 1 priority for the ATA and its members. It's an issue that really embodies real people who are out there getting the job done when it matters most. And I would say this pandemic has been no exception.

For trucking, that's nearly 8 million people. One in 18 jobs in the United States where a truck driver is the top job in 29 states. And roads and bridges are political theater, they're our shop floor. And that's what we've been telling Congress for the last five years.

So, it really shouldn't surprise anyone why we supported the bipartisan Infrastructure Investment and Jobs Act, the IIJA, and why we’ll remain very vocal about why it's the most historic, immediate, and impactful decision that directly addresses our nation's ailing supply chain.

Now the IIJA became law because a majority of Congress decided to put the country ahead of themselves, just candidly. For our industry, infrastructure is not political, nor are roads and bridges. We all drive on them. This has always been about doing what's best for the country. My members have repeatedly asked Congress to make this happen. Now here's why. Since the pandemic began, the nation's 3.5 million truckers continued to serve America, moving 72.5% of the nation's freight tonnage, and serving more than 80% of US communities that rely exclusively on trucking. That includes milk, eggs, bread, fuel, but also PPE, the test kits, and now the vaccine itself, all of it delivered by truck.

Ailing roads and bridges across the country highlighted by the nation's top 100 bottlenecks and the inter-modal connectors, of which 70% in the US are under state and local jurisdiction, are really impeding our ability to serve consumers and grow the economy, especially at a time when our supply chain is so severely strained.

So the IIJA, now, is historic because it includes a 38% increase in road and bridge funding over the next five years. And in our view, this is going to help alleviate a lot of that congestion and shorten the time that it takes to get goods into the hands of consumers, lowering prices. It's also going to ensure that goods are delivered safely. And less congestion is going to mean a significant reduction in carbon emissions.

So there's something in this for everyone, including state Departments of Transportation, who will now see year-over-year certainty and ability to plan large projects over the span of, say, three to five years, with the guarantee that money is going to be there.

Second, the slow return to post-pandemic work is an issue I want to touch on. Matching talent with consumer demand has long been a headwind for the trucking industry. Truckers, we entered COVID-19 short 61,500 drivers, and we're now at 80,000 short as we exit the pandemic. These numbers reflect what any of you would experience waiting for service at a restaurant or standing in longer lines at a grocery store checkout.

Now driver pay has increased substantially, especially in the most challenging sectors of our industry. Long haul earnings, for instance, are up 24.3% since the beginning of 2019, and increasing at five times their historic average, which is nearly 10% year-over-year.

Yet the shortage and retention of talent remains, elevating other contributing factors such as lifestyle changes, more time with family, work flexibility choices that only, say, independent contractors enjoy, time loss from severe congestion, and detention time in getting those loads delivered are all added layers of mandates, including requiring our workforce to vaccinate for a job that has really one of the lowest risk and exposure rates in the country because the drivers are in their cabs by themselves.

The IIJA actually recognized all of these challenges, specifically by including investments in training younger talent to safely and responsibly operate trucks across state lines. Add it all up and that's going to be a pretty clear, it's pretty clear why the IIJA was historic and timely. In light of the COVID crisis that we're in, the supply chain strains that we're experiencing, the investments, not just in physical infrastructure, but human capital, are also very, very significant and timely.

Lastly, I'd be remissed if I didn't mention how significant passage of the IIJA is in the midst of all this elementary school style political playground that we're experiencing here in Washington, DC. Last month, the house TNI chair he held another hearing on infrastructure and this was our 25th time that ATA had actually testified on the issue over the last five years.

The razor-thin majorities in the House and Senate reflect a very divided nation, yet the IIJA, the

Infrastructure Bill still passed. And this, to me, suggests that vocal, steady advocacy on issues that actually make a difference in the lives of every American and truly strengthen our economy can still pass. And we never gave up. The people on this panel never gave up. And it proves that hard work does pay off.

And the IIJA is a piece of legislation that I believe we can all and should be very proud about. So I'm really honored to be on this panel today and look forward to taking some questions. So, Joan, with that, I will hand it off to Ed.

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Spears and Mortimer on screen together, then Mortimer alone.

(SPEECH)
Great. Thanks, Chris. And, Joan, I want to thank you. And great honor to be on this panel with Chris and Bob and all of you. I want to start where Chris left off. The critical importance of getting this legislation done from the U.S. Chamber's perspective, Chris talked about it being tier 1.

We view infrastructure as the backbone of our economy. It's the circulatory system of how we're able to move, how we're able to grow, and how we compete in the world. And the United States, which was the envy of the world, has seen our infrastructure deteriorate over the last 20 years. The World Economic Forum has ranked the United States infrastructure 13th. China spends $8 trillion in 2020 on infrastructure, where we spend about 1.5.

So if we're going to have long-term economic growth, our view was we need to get federal leadership and get a federal vision for building infrastructure for the 21st century. Again, we've gone from a brick and mortar economy to an e-commerce environment. High-skilled millennial workers are looking for a variety of different transportation options to where to live, where to locate.

Businesses, particularly small businesses, which we represent about 94% of our members are small businesses, they're looking for infrastructure to be able to allow them to grow, to let them get employees to-and-from work, customers.

And again, this is something that we need federal leadership on. You have to have a national system to make sure that every American benefits from these investments, to make sure that whether you're in Park City, Utah, or in Wichita, Kansas that you have safe, efficient, and vitally critical infrastructure that allows you to compete in the global marketplace and have a great quality of life.

So again, this is a game changer, this is a once in a generational opportunity, from the business community perspective. It's something that we worked with Republicans and Democrats on. Our view is this is a core responsibility of government to provide these investments, to provide the vision as we move to the 21st century. And we were honored to work with many of you to get this thing over the goal line.

Again, this is really going to be that once in a generational long-term investment that our nation needs to secure long-term economic growth long into the 21st century. So, again, I talked about where our infrastructure was. Our economy loses $170 billion annually due to lost productivity due to inadequate infrastructure. So we at the chamber we're glad that this was a comprehensive Infrastructure Bill.

Traditionally, Congress does a Road and Bridge Bill, they do a Water Bill, an Airport Bill. This is all physical infrastructure. Our water systems getting let out of the pipes, rural broadband, there's public-private partnership solutions to provide that, hardening our energy grid and making sure that our nation is energy independent.

Our view is it was critically important to have a totality of infrastructure addressed in this legislation. Again, it also includes provisions that is going to accelerate project delivery so that we can actually deliver, even with this Bill, which is $550 billion in new investment over five years, up to $1.2 over 8. It’s still not enough, but again let's maximize the limited revenue that we do have.

Let's make sure we have a National Bridge program. So we have 47,000 structurally deficient bridges. This Bill is going to address that. So again, it took a long time, but good things come to those who wait. And we have an opportunity now to take advantage of this bipartisan Bill, and to make sure that we make these once in a generational investments to not just fix old infrastructure, but to think anew.

And so our focus has moved to implementing this key piece of legislation, working with the administration, working with governors, mayors, local officials to make sure that the projects that we invest in are game-changers. They're substantially going to make the quality of life of the American people better.

Chris talked about that they have a bottleneck study. We know where the congestion points are. Let's get them fixed, let's address them, let's make priorities, let's make sure we get this done right.

You might remember we had a Bill that was a Stimulus Bill that there was infrastructure in. In 2009, the big word was shovel-ready. This Bill is a very different Bill. This is going to fund projects that are shovel-worthy, substantially going to improve our lives, not just in a fast way, but in sustainably long-term way.

And so these investments in this Bill are going to be much different than other pieces the legislation that we've gotten out of the federal government. This is a long-term blueprint for economic growth. And so we at the Chamber we're glad to work with the partners on this call to get this thing over the goal line. We want to applaud the members of Congress who took a tough vote. We don't view it as a tough vote because we view this as a core responsibility of government. But we have an opportunity here and we're going to continue to work with all folks in this field, our public officials, our private officials. We think there's opportunity here to leverage some of these public dollars with private investment, so we can actually get $2 to $3 trillion worth of projects out of this legislation.

So again, the opportunities to substantially rethink, renew, and to make sure we have an economic system that will last long into the 21st century, that's what this legislation is all about. And so we're honored to be here and I look forward to continuing this conversation. And now I'll pass it over to Bob Raney.

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Raney in a video window in the upper right corner. Text, Wednesdays with Woodward Webinar, Impact of the Infrastructure Investment and Jobs Act. Bob Raney, Bond & Specialty Insurance, Construction Services, Travelers, December 15, 2021

(SPEECH)
Thank you, Ed, and also Joan and Chris. It's good stuff and great to hear such enthusiasm for the IIJA. I'm a little less political in my role, but I am going to comment on a couple of things that we've been talking about here, within our Surety Group regarding our business and our contractor clients that we think might be some interesting and meaningful points regarding the IIJA and its implementation.

First, I want to talk a little bit about the scale of the Bill and the capacity of sureties and contractors to absorb it, and then I also want to talk a little bit about how large projects might be impacted. I know Chris mentioned likely seeing more of those. I think I agree with that, but I do think that there are some interesting things to think about and I'll show you what that is. So let's talk a little bit, first, about the scale.

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A graph illustrates Public Construction Spending and GDP from 1994 through 2020

(SPEECH)
And I think it's helpful to look at a little bit of history. So what this is, is a graph of public construction, spending, and gross domestic product. The total public construction spending is that solid jagged-looking line, the GDP is the series of diamonds.

And what you see as you look at this is back in the '90s, these two things ran in lockstep with one another. The 2000s were boom years and pretty strong for infrastructure. You can see in the Great Recession, that's the shaded area there in 2008, you see some impact from the aura of the American Recovery and Reinvestment Act that Ed mentioned boosted some public spending on infrastructure.

But then look at the last 10 years on the right side of the graph, in talking about weakened spending and a lack of investment in infrastructure and a need to invest more. You can see that that's been the case over the last decade or so. We've been investing in infrastructure and in all public assets at a rate that is well below the historical norms, and so that brings us to where we are today.

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A graph depicts Heavy Highway Revenue vs. Public Construction Spend from 2016-2021

(SPEECH)
If we could advance. So I thought I'd look a little bit more specifically at one of the key provisions in this Bill and that's the heavy highway. It's the biggest single component of the Bill. What this graph shows is the same public construction spending data, that's the blue bars. And I've superimposed on that average revenue over the same period from our middle market heavy civil contracting portfolios.

So that's 519 middle market construction firms that do this type of work over the same period of time. And it's no surprise their revenue has moved pretty much identically to the total public construction spending numbers. Actually, our construction surety numbers, our gross written premiums follow those same metrics very closely as well.

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The graph now extends into 2026.

(SPEECH)
If there were no new Infrastructure Law, no IIJA, we really would expect this to continue on the same trajectory. And that looks like this. And we call this the baseline case. What we would expect if there were no IIJA, what we would expect if we were simply renewing things like the Surface Transportation Act, and some of the other funding programs that simply get renewed when they expire without meaningful increase.

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The graph depicts increases each year, 2022-2026. Text, $110 billion in Annual Infrastructure spending creates a 30% increase to baseline 2022 spending

(SPEECH)
So with this as a baseline, we can also take a look and superimpose what the IIJA will look like. And I grant you this is a simple exercise because we don't know exactly how much of the IIJA spend is going to be pure construction. There are some other things in there. We do know that a lot of it is public construction.

So, what you see is a very sudden and very significant increase in public funding over what we've seen. And this is going to be interesting and I think it could create some issues. Because we are hearing from our contractor clients in this space, in the heavy civil space, that they're having labor challenges and resource challenges, even at baseline levels. So to ramp up to this higher level of spending, I think is going to be a challenge.

Furthermore, I think we feel like, and again based on the market intelligence we received, that this is a dynamic that impacts the whole value chain. And by that, I mean owners, which are departments of transportation authorities, airport and aviation authorities and the like, designers, engineers, contractors, suppliers, subcontractors and so forth.

All of these entities have right-sized their business based on 10 years of that baseline level of activity. And it's going to be a challenge for them, for the whole value chain to be able to absorb, I think, this additional funding because it is so robust.

So I think we'll end up seeing something more like this, which is a much more gradual representation of the way that these monies actually might flow into the marketplace. I think we’ll see, rather than a sudden infusion, I do think we'll see a step up over the next few years. I think contractor revenues will follow that even as they obtain projects and earn that revenue.

Hard to say, but I think it's pretty reasonable to believe that it could be 2024 or 2025 before we're really feeling the full impact of this program, and these entities are able to scale up to absorb it. So I think that's an interesting point.

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An Infrastructure Study graph depicts Performance of Jumbo Civil Projects from 2004 through 2020. 20.46% at the highest point; negative 5.39% at the lowest point.

(SPEECH)
The second point I wanted to make is around large projects. And I want to talk about this because I think, I think Chris is right. There is going to be an incentive for owners, particularly departments of transportation, aviation authorities and so forth, to try to award some of these new dollars in the form of large design-build construction projects. And that's because if you're somewhat resource-strapped and you're trying to deploy a lot of funding in a short period of time, a very large design-build construction project is a great way to do that. It also requires less administration over time than a lot of small projects. So, I do think the incentive to see that is going to be there.

The challenge is that many of those projects have not performed well in the marketplace over the last 10 years or so. So the slide you see here is from a study, the Travelers Infrastructure Study. You may have seen some information about it in the media recently. It's a study of 224 heavy civil construction projects over 17 years. The average size of these projects is $800 million, all types of civil infrastructure. 

And just to explain what you're looking at on the graph briefly, the blue horizontal line across the middle represents the margin that the contractor expected to make when they initially started the construction project, the black line is the margin they actually made, and then the red dotted line are claims and under-billings that are still outstanding on those projects, which may represent additional write-downs or profit deterioration on these projects.

So what you see is there was a brief period of time in 2007 and 2008 where contractors did really, really well on these projects. But since about 2010, these have really been tough and difficult money-losing projects for a lot of the large heavy civil construction industry.

So I think we could have this dynamic where owners, the Departments of Transportation, are interested in doing more of this, at the same time, many of the large contractors who can do this work are trying to move away from it. And that's going to create a very interesting dynamic.

(DESCRIPTION)
Outlook. Opportunities: Multi year tailwind for growth and margin expansion. Variety of infrastructure; highways, transit, water, renewables, etc. Historically strong balance sheets. Jumbo segment emerging from decade long slump with renewed discipline. Robust surety capacity available in the market. Challenges: Tight labor market conditions. Supply chain volatility. Owner staffing and capacity issues. Engineering talent and resources. New procurement models for larger projects. Need for smaller projects too.

(SPEECH)
So in summary, just a couple of points. It might sound like I'm a little bit negative on the plan, I'm absolutely not. I think it's a terrific program. I simply think it's going to take some, there's going to be some adjustments and some growing pains, if you will, in order to get the funds fully flowing and that's just going to take some time. But once it is flowing, it really should be a nice tailwind for our contractor clients, for our agents and brokers who service those clients, for insurance underwriters, surety underwriters, and a whole host of other folks that benefit from these types of projects.

Another good piece of news is in bullet 3. When we look at the financial health of those 519 middle market civil contractors, it's the best we've ever seen it. So the industry is very, very strong going into a very robust infrastructure program. We feel great about that. Surety capacity is very robust. So there's a lot of positives that would indicate we are ready for this.

The challenges are the first four bullets over on the right. You're simply going to hear a lot about labor and supply chain and resources at the engineering and owner level and so forth. But overall, we're excited about the plan, our contractors are excited about the plan, and really look forward to learning more about it from my colleagues who see it from a little bit different angle.

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Joan Woodward, Chris Spear and Ed Mortimer join Raney on screen.

(SPEECH)
And with that, Joan, I'll flip it back to you and the group.

Well, Bob, Chris, Ed, that was really just fantastic getting your different perspectives on living through the Bill over the last several years and making it happen, and then trying to figure out what's next because of the implementation and what the agencies are going to be doing at the federal and state levels are really important. And then, Bob, hearing from you about our Surety Business and understanding the insurability of these projects and the profitability, which, of course, is important to look at.

So, I'm going to turn the tables on our audience, just for a moment, and we're going to ask you, our audience, some questions. So if you haven't done this before, it's pretty easy. Here's our first question for the audience. So, do you think that the new Infrastructure Law will add materially to GDP over the next five years? Pretty simple, yes, no, or you're just not sure.

So will this $1.2 trillion infusion of cash, and that's over eight years, will that add materially to GDP and economic activity? So it looks like our answers are coming in. About 70% of you that I can see believe it will, 15%, this is interesting, saying no, they're not going to add materially at all, and then another 15 or so, not sure. So, ok, that is interesting. Most of us believe it will add something slightly to GDP. How much? We don't know at the moment as Bob said.

OK, second question. Do you think that we will see a big uptick in the need for surety bonds for all these new projects going forward? Yes, no, or you're just not sure. OK. So that was much more unanimous. We had about 85% of us said yes, for sure, and I think that's music to Bob's ears and probably would agree with that, and then we had about 15% said no or they're not sure on the surety bond sector.

OK, so let's get this underway. First of all, Bob, do you have any comments on what we just saw from the audience there in your view?

No, I completely agree. Especially in the road and bridge segment, the airport segment, and some of the water segments, the funding there is going to be really pure public construction that's heavily bonded. Some of the other segments I think we're going to have to wait to see how that money is procured. But either way, I think it's a pretty good future, I think, for both insurance and surety with respect to this program.

Wonderful. OK. Chris, we're going to get back to you. So what are some of those examples, those big projects that truckers want to see? I think we put in the chat feature the 100 top bottlenecks in the country, and there's a little link if anyone's interested to see where the 100 top bottlenecks for congestion are. But what do the truckers want to see out of this in terms of big projects?

(DESCRIPTION)
Spear

(SPEECH)
Yeah, thanks, Joan, that's a good segue. I think when you're looking at projects, you want to follow that annual research that Ed also cited that our industry puts out each year. And it's actually a list of top 100 that's of most interest on Capitol Hill. They all want to know whether or not their state or district is on that list. And we use that, actually, as leverage in trying to get this Bill done by getting their attention about the severity of congestion and the impact that it's having in their local economies.

So I think when you look through that list, you're going to see Atlanta always tops the list. Texas, in general, has got several bottlenecks. Houston certainly rises to the top. New York, New Jersey, that Northeast Corridor is always ripe for new projects that are going to need to be significant over the next five years. And of course, Chicago, LA should not come as a surprise. Those top projects are very measurable when you're alleviating congestion. You will see a significant return on that investment. For our industry, we actually track this data through GPS. So you can see the movement of the trucks, the amount of time they sit in traffic, and it's actually very measurable.

In total, if you look at the 100--and we're only, by the way, 4% of the vehicles on the roads in this country, yet we're moving 72 and 1/2 percent of the domestic freight in the U.S. So that's just some context. If you take the top 100 bottlenecks annually, that's $74 and 1/2 billion lost, a cost just to our industry sitting in those top 100 bottlenecks. So very, very measurable. And that's a lot of time and productivity lost that we calculate.

That also translates into 425,000 drivers sitting idle for an entire year. So think about that, it does a couple of things. One, that emits 67 million metric tons of CO₂. So for anyone with environmental concerns, that's definitely measurable. So there's a gain from alleviating congestion there.

But also that human capital element of it. Getting people to come into our industry, remain in the industry. If you're paid by the mile and you're sitting in traffic that much, you're going to have a lot of time on your hands to think about what you might want to be doing differently.

And so congestion translates into retention. And keeping people in this job is compounded by the amount of traffic and congestion that they sit in. That's $5,000 each year measurable loss to that driver because of the congestion that's out there. Very, very measurable amount of time. So improving congestion not only helps the driver, the company, it helps consumers get things on time, it lowers the cost to deliver, certainly has an advantage to safety, and of course environmental.

So these are all things if you bring in all top 100 bottlenecks would be extraordinarily impactful on our economy, and I think a very, very measurable return on the investment. So this Bill is putting our taxpayer dollars where it matters most.

(DESCRIPTION)
Woodward

(SPEECH)
Thank you, Chris, for that. And we do want to talk about driver shortages, and we'll get to that in just a minute. But I want to go to Ed. Because coming in through some of our agents and brokers questioning on the chat feature here and some others that came in earlier, the mega projects, this huge infusion of money into our economy over the next couple of years, some people think this is inflationary. And so we know there's a great concern out there about sustained inflation and what that might mean for our businesses, our economy, our personal lives just going to the grocery store or the gas pump. So do you feel that this Bill can be inflationary or not? Ed, that's to you.

(DESCRIPTION)
Mortimer

(SPEECH)
Joan, great question and one we hear about quite a bit. We actually view this as a counter inflationary Bill. This is a type of investment we need more government investment in, which is physical infrastructure, which is providing long-term economic growth.

Unfortunately, as this debate happened over the last year, some folks have conflated the bipartisan Infrastructure Bill with the some people call it human infrastructure, it's called Build Back Better. But it's a more social Bill that is a Democrat-only Bill versus the bipartisan physical Infrastructure Bill, which we've been working on for over 10 years.

So again, as I talked about earlier, the investments that are coming out of the bipartisan Infrastructure Bill, it's not about just injecting a lot of adrenaline in the economy right away. And I think Bob's slide alluded to this. We're looking for a sustained long-term economic growth over many years. So it's not going to be shovel-ready. We're not just going to go out and hire a bunch of people and build a bunch of projects.

It's going to be a long-term effort. We're going to make strategic decisions--Chris talked about the bottlenecks--strategic decisions on how to address those. And that takes time. But again, when you make those investments, these are assets that the American people will benefit from for 50 to 75 years to come.

So our view is we don't need to rush it. We need to make sure the investments go to projects that are truly going to alleviate the congestion, truly improve the lives of the American people. And it's going to take time. And so when we talk to our members, a lot of our members around the country are making their priority list and socializing it with their elected leaders. Because again, we're not going to be able to fix every piece of infrastructure in America. We need to make priorities, and make sure the priorities are those projects that truly, systemically can make the system work better, which means we can compete better in the global marketplace, and improve the quality of life of all of our citizens.

(DESCRIPTION)
Woodward

(SPEECH)
OK, that's great. So that leads me to the implementation of this law. And there's a lot of hands in the pot that want this money. So who makes those decisions about what projects get funded or not? We know we have the top 100 bottlenecks. But who actually decides? Is it back to Congress to decide, is it the Department of Transportation, is it the state and local governments?

So, Chris, I'm going to go to you first and then maybe back to Ed. So, Chris, who's deciding, how do these get implemented, and is there a long list of projects that people just have a food fight over?

(DESCRIPTION)
Spear

(SPEECH)
Yeah, there was a tremendous amount of debate between the House and Senate on how to do that. And we've heard the term earmarks over many years. Those were eliminated under the Obama administration for various reasons I won't get into. But shedding that responsibility of Congress to identify projects.

And there were environmental impact studies, there were a whole host of conditions that were attached to those earmarks, but for, I think, political reasons, those were dispensed with. There's a lot of debate in this Bill about bringing those back, particularly in the House, where projects were earmarked. They brought back earmarks for infrastructure. The Senate bipartisan compromise did not include any of that. So that was dropped.

That, essentially, moves this, Joan, over to the Department of Transportation. So Secretary Buttigieg now has a tremendous amount of discretion and authority to decide where those pots and money are going to go, in tangent with all the State Departments of Transportation who will be submitting those projects, meeting those criteria that are within the Bill and the law to ensure that they get prioritized and funded appropriately.

But, again, Congress has removed itself from earmarks and handed that authority, again, over to the DOT. So you're going to see a lot of that decision making being done at the federal DOT and at the state level. So that's where we anticipate most of that unfolding under the IIJA.

(DESCRIPTION)
Woodward

(SPEECH)
OK, great. And to Bob. So to you. I know you work a lot with state municipalities on these surety bonds and bonding these major projects. Talk to us a little bit about some of the bigger projects that Travelers-- over the past decade or so we saw that chart about profitability of the contractor--but Travelers' book of business and how we've insured, I think, some pretty major projects in the last 10 years or so, in 20 years.

(DESCRIPTION)
Raney

(SPEECH)
We do. We are fortunate to be a large surety company. We have, in our portfolio of contractors, some of the largest heavy civil contracting companies in the United States. We've certainly supported them from a bonding standpoint.

Some projects could include the replacement Tappan Zee Bridge project, which I think might still be one of the largest projects and largest bonds ever written, the replacement of the Alaskan Way Viaduct in Seattle was a large one.

In the last couple of years, we've seen a lot of activity in transit systems, especially LA in getting ready for the Olympics. They've got an enormous program. We've done a lot of bonding work there. Airports, especially on the West Coast, Seattle, San Francisco, LA. San Diego just awarded a very, very large airport project. It includes roads and bridges, too, in some of the locations that Chris mentioned, especially Texas and Georgia. They had some big projects on the Georgia 400.

So it's really a variety of things. Some of the things you don't see, like a giant rehab of dams, there's been a lot of work there, some rehabs of locks to go through our water systems can keep flowing. These are very large, very important projects, but a lot of people aren't even aware that they're going on. So, yeah, it's been a real privilege to be able to support some of the key pieces of American infrastructure.

But don't forget most infrastructure dollars are actually spent on local projects, resurfacing roads, widening local roads, running local water lines, expanding a local water treatment plant, those kind of things. That's all vital infrastructure as well.

(DESCRIPTION)
Woodward

(SPEECH)
Great. And back to you, Bob. Just on the challenges of implementation because I know you talk with lots of contractors and labor shortages and training, and we're going to get back to Chris on the labor shortages with regard to truckers, but what are you seeing in terms of--I know you're worried a bit about this labor shortage we're having now and of course inflationary pressure on wages in implementing this new law.

(DESCRIPTION)
Raney

(SPEECH)
It does. My clients sound very similar to, I think, what Chris might be hearing from the trucking industry. Heavy civil construction hasn't been a popular choice for young folks coming into the workforce for the last, five or 10 years. As a result, the workforce is aging, there's a lot of retirements. That's putting pressure, as I mentioned in my presentation, on labor levels, even at the baseline levels that I was talking about of spending.

So the industry is really trying to reach out into high schools, into apprenticeship programs to try to recruit more people into the industry. And like Chris mentioned, they're actually very good jobs. They're just hard to get people to show an interest in them. Our clients are also concerned not just about their own resources, but the resources of all the other people they depend on in that value chain.

They've seen a lot of retirements at Departments of Transportation, they see a lot of scarce resources in the design and engineering community, they can't build something until it's designed. So they're concerned about their own, but they're also concerned about the entities they depend on.

(DESCRIPTION)
Woodward 

(SPEECH)
All right. So, Chris, labor shortages in your industry are acute. Tell us what this Bill does, what you're hoping for, and what you're seeing. I think you and I were talking a little while ago about if you're an inner-city kid in a high school and you know you're probably not going to be going to college, you don't see a lot of, the 18-wheelers are not flowing through New York City on a regular basis. So you don't see it every day as a potential career for you, and these are really good careers for a lot of people. So what is this law doing, and what are you hoping for?

(DESCRIPTION)
Spear

(SPEECH)
The IIJA, as I touched on in my opening remarks, beyond the physical infrastructure investments, the human capital piece of it was equally important. I think it's compounded by the fact that we're seeing so much pressure being placed on the supply chain.

Probably most notably is the labor shortage. Not just trucking, but across all segments of the economy. We're seeing an extraordinarily slow return to the workforce. And that that's really raising inflation, possibly permanent inflation, which we're all experiencing. When we go to the store, we're seeing that.

So the labor shortage is certainly something that has been on our mind well before the pandemic. As I said, we came into the COVID era with 61,500 drivers short, we also have technician shortages, dock worker shortages. All of that is elevated coming out of the pandemic. Drivers now short 80,000. That is placing a lot of pressure on our industry to deliver more with fewer people and less equipment.

So beyond the labor shortage, you're also seeing a shortage of chips, not just in passenger vehicles, but in trucks. So that's sidelining equipment. Yard shortages, pipeline hacks, natural disasters, and then laced with COVID on top of it. There's so many elements within the supply chain that are adding to that.

For our piece of it, obviously it really does center on our employees and making certain that we have adequate, well-trained so they can safely and responsibly operate the equipment state-to-state. And that is very much our focus.

And I think the IIJA's emphasis on the younger talent pool out there, the 18 to 20-year-olds that are not currently allowed to cross state lines, the IIJA enabled them to do that with the caveat that they get training. So 400 hours of training, of which 240 hours you got to have a qualified driver in the cab with them, you have to have AEB speed limiter controls, cameras, so technology on the equipment as well.

49 states allow an 18-year-old to drive a class A truck. So that works pretty well in Texas or northern California to San Diego and back, but you just can't cross state lines, which our industry does each and every day. So equipping us with talent that can safely, responsibly operate the equipment across state lines creates a whole new generation of workers. Over the course of the next 5 to 10 years, we can train and grow in this industry where you don't need a college degree. You can make $60,000 to $100,000 with full health care without all that debt to come with it is a very attractive element. So targeting that younger talent pool, that IIJA enables us to do that, which is significant.

Beyond that, we need to take care of our own, health care and wellness programs. We need to target veterans; we need to target exiting service members from the military that have this skill set. But also, in urban environments as we talked about, Joan, we've got a lot of people that have never familiarized ourselves with our industry. They don't see the trucks; they don't operate downtown.

Minority hiring, bringing more women into our workforce and getting those gender rates up, that is a focal point of the industry that's going to need to happen over the next 5 to 10 years if we're really going to meet demand long-term

(DESCRIPTION)
Woodward

(SPEECH)
Thank you, Chris, thank you, Bob. So, Ed, back to you. We have a couple of questions coming in around permitting. And is the permitting process, the environmental studies that need to happen for a lot of these larger projects and smaller ones as well, obviously, what are you saying in terms of the permitting process potentially slowing down the progress of this larger momentum Bill?

(DESCRIPTION)
Mortimer

(SPEECH)
Well, I mentioned this a little bit in my opening remarks. We see this as one of the huge victories that doesn't get a lot of press. But we think it's actually going to be more substantive in allowing more projects to move through the system than even the increased funding. And that is providing some modernization in the permitting process.

Under the IIJA, a provision in the Bill calls for codifying what the Trump administration had did through executive order, which is one federal decision, which is providing a two-year time limit for getting approvals on major federal projects. And again, this is done without changing environmental law, without changing public input, but again, providing a transparent and timely process.

So, let's get a yes or no answer. And if it's a no, let's take the limited dollars that we have and get them into projects that are yes. Too much of the cost of these projects end up in the permitting process. We think this Bill is going to ensure that the dollars are used more efficiently than they have been in the past, and it's going to encourage state and local governments to meet these federal requirements.

There are some states that have even more onerous environmental requirements than we have at the federal level. We believe provisions in this Bill are going to incentivize states to meet these new federal requirements so, again, that we can have a transparent process.

One of the provisions in the Bill has what they call FAST-41. It's a dashboard. So you can put your project into the dashboard, you can see where it is in the permitting process, what's the agency that's holding it up. We believe in transparency and accountability are going to allow more projects to get delivered through the system.

So, again, dollars are always important. We're glad to see this Bill, the 35% increase in highway funding, but the permitting provisions actually may have more of a long-term impact on the amount of projects that are delivered, the amount of projects that we're going to need surety bonds on, and, again, maybe the greatest legacy of this legislation moving forward.

(DESCRIPTION)
Woodward

(SPEECH)
Actually, that's real. A lot of people don't understand how important the permitting process and streamlining is. So it's great that they're going to codify the Trump era executive order on that. So thank you, Ed, for explaining that to us.

I'm going to go back to you, Ed, for this question. It comes in from Chris Angles at Angles Insurance in Pennsylvania. So Chris is asking, will the infrastructure be able to handle a large number of EVs on the road charging all at the same time? As you know there's about $8 billion in this Bill to build a nationwide network of electric vehicle charging stations.

And, first, I want to hear from you about how that's going to happen and who's going to do that, because Tesla has its own thing. If you have a car that's not a Tesla but an EV, you can't go over to a Tesla charger. So is this nationwide network going to be built? How long will it take? And what about the demand on the electric grid if we're having people charge all at the same time? So sorry there's lots of questions in there, but that was from Chris Angles.

(DESCRIPTION)
Mortimer

(SPEECH)
No, great question. And again, I take a lot of interest in the Bill on this. I think we all recognize that electric vehicles are becoming a greater part of the fleet. And again, I think we recognized, and I know Chris Spear has done a lot for trucking, is that we know we need to have an infrastructure to handle these new type of vehicles. And so this legislation provided what I would call a down payment.

This is not going to allow charging stations throughout our nation, but what it's going to do for the first time is really incentivize getting it on the interstate highway system. Largely, electric vehicles operate in urban areas, I know trucking does them a lot in distribution centers. But to really get more long-term distances, over 300 miles, we need to expand charging stations throughout the country.

The dollars in the Bill, you talked about it, I think there's 5 billion in a formula program, another 2 and 1/2 billion in a competitive grant program. It's a start. It's going to take 20-some years, I believe, just till we make sure we have charging stations throughout the country that really makes sense.

But again, this legislation was about the future. This is a down payment on building that system out. It's going to take time, but we needed to do it. The longer we wait, we're going to be more behind the curve knowing, again, that electric vehicles are coming online.

But, Joan, you raised a good question about Tesla, operability. I know many of us were thinking maybe we could put some of these, the private sector could do some of these at rest stations. There are some issues here that still have to be worked out, and we at the chamber are going to be very involved. Obviously, Chris with truckers, this is a critical issue as all industries are looking to move toward electric, and to be honest with you, hydrogen and other alternative source vehicles. but again, we're looking at a long glide path here, 25 plus years. This money and this Bill is only going to start the process.

(DESCRIPTION)
Woodward

(SPEECH)
Great. Chris, real quick to you, a question on the platooning, truck's platooning with autonomous vehicle technology. How long is that going to be? When should we expect these massive trucks rolling down the road without drivers in the second or the third cabs? Tell us about that for a minute.

(DESCRIPTION)
Spear

(SPEECH)
Well, it ain't happening tomorrow. Some would suggest that's just not possible. But we still have pilots in planes. I kind of like that when we're flying through turbulence that there's a level of comfort that we have two experienced people up in the cockpit to take control of that plane. It's the same logic with respect to moving an 80,000-pound vehicle, many of which are moving hazardous materials.

I don't think in this kind of environment, with security concerns, that you want to cut loose an 80,000-pound vehicle that's moving something that can explode, for instance. So there needs to be drivers attached to that equipment that are responsible for overseeing its security, not just making certain it gets from point A to B safely. So I think that's the same logic that we have pilots in planes, and not just passenger planes, but cargo planes. If you compare that to trucking, it really is the same logic. So there's a security element of it that's also attached to our industry.

And I think there are some gains, though, Joan, over the next 20 years with respect to levels 2, 3, and 4 autonomy where you have driver-assist technologies that are going to enable that driver to do a lot more and do it safely. And with the investment in infrastructure to do things more efficiently from point A to B, then it becomes more of a safety discussion.

And I think technology has a tremendous role to play in improving safety by lowering the number of accidents and fatalities, which hover around 40,000 a year. That is ridiculous. We have so much capability in this country to reduce that number and save lives.

Our industry is a catalyst in that. Two-thirds of the accidents that involve trucks are caused by passenger vehicles. And the two leading causes of that are speeding and distracted driving, like texting. And those things are not going away any time soon.

So, technology and the integration of that where cars and trucks and infrastructure are now talking to one another and seeing hazards as they develop and taking actions that maybe humans don't see or take in time is going to have an impact on reducing that fatality rate.

I like levels 1 through 4. I think they have great tremendous potential. Level 5, where you remove the steering wheel and we're all being guided electronically, I think we are a long way away from that. No different than what we're seeing in aircraft today.

So, I think it's a transition. It's one we're very excited about. I think it has measurable gains. But we really need to put this into context, a realistic perspective, and approach it in that framework. And I think it'll be a sign of good things to come if we do.

(DESCRIPTION)
Woodward

(SPEECH)
Yeah, we couldn't agree more. At the Travelers Institute, we have two major pillars around autonomy and insuring autonomous vehicles and then one around distracted driving, which we've been really pounding the pavement on for many, many years.

As you point out, 97% of all crashes are human error. And so if you take out some of that human error and put in some autonomy, like you said level 1, 2, or 3, we see great promise in that. And so at the Travelers Institute, if you're interested, go on our website. We've written a number of white papers around insuring autonomy and other distracted driving tips and tricks for you and your family, as well as your professional drivers out there.

Another question coming in from Andy Bessette here, it's interesting that on the list, Hartford is number 30 with I-91 and 84 interchange, which is so poor. How does the federal government interact with state and local governments to do the right things? State government might try to push towards transportation issues and their constituent areas, while ignoring a top 30 major project that needs improvement.

So how does the federal state, maybe this is to you, Ed, the federal state--so Hartford has this major priority with this number 30 bottleneck, yet maybe the state of Connecticut wants to focus on New Haven or other places that maybe have more political attributes to them. How do those decisions get made?

(DESCRIPTION)
Mortimer 

(SPEECH)
So it can be a complicated process, but I'm going to make it very simple. And this is what we're telling our members around the country. The key is for business leaders to work together to come up with priorities. So obviously we work very closely with the trucking industry.

Working with other businesses in the community, we have to make that type of project a priority. When you have shared priorities and then you go to your elected leaders, and you tell them this is what we need the investment to go at.

Again, some of the decision is at the federal level, many of it is let to the state and local levels. But let me just leave everyone with a couple of thoughts here. Number 1, this Bill isn't just about federal dollars taking care of your infrastructure problems, it's a shared responsibility, federal, state, and local. And we want to encourage more private investment.

The projects that have the most likelihood of success are the ones that put a plan together, they show they have support, and they just need some federal gap funding. So again, putting a plan together, showing you have stakeholder support, that is how you have the most likely chance to get your project invested in moving forward.

(DESCRIPTION)
Woodward

(SPEECH)
Great. Rapid fire question last one to you, Bob. So agents and brokers, what can they be doing now to prepare themselves to get ready for all this influx of new federal spending in their businesses?

(DESCRIPTION)
Raney 

(SPEECH)
I think it's a good chance for agents and brokers to add some value and advise their clients on things like making sure that they're getting ready for a lot of questions about the resources and how they're going to resource work.

I certainly would advise them to maintain their financial strength. And if they can avoid paying an unnecessary dividend or something like that at this point in time, it'd be a good idea to maintain that strength to take advantage of what's coming. And then maybe even just help them strategize. 

I've talked with a lot of contractors about things like, hey, do you want to go after early work under the program? If you do that, you may go after more competitive work, if you wait, you may be able to pick up projects with fewer bidders later. So just thinking through how a contractor might best approach a program like this to take full advantage. And I think that's a great role for our agents and brokers to play.

(DESCRIPTION)
Woodward

(SPEECH)
Wonderful. Well, Bob, Ed, Chris, this really, really has been just terribly interesting and fantastic knowledge-sharing with our audience. We really thank you for all you've done in Washington to make these Bills and become law. And, Bob, thank you for being such a leader in the Surety business. Not just to Travelers, but industry-wide, you're recognized as the guy out there. So thank you all. Appreciate it.

(DESCRIPTION)
Wednesdays with Woodward Webinar Series. Upcoming Webinars: January 12 How to Negotiate Without Fear with Expert Strategist Victoria Medvec. January 26 Thrive: How Insurance Agents and Brokers Will Succeed in 2022 With CIAB President Ken Crerar and Travelers' Pete Heard. February 2 Hit Me with Your Best Shot: A Conversation with Johnson & Johnson's Joe Wolk. Register: travelersinstitute.org

(SPEECH)
And I want to turn our attention to our couple upcoming webinars to let everyone know what's coming up. So January 12 we're going to be giving out a book. In fact, you can go ahead and register to request your free book of Dr. Vicki Medvec. She's a negotiation expert.

Whether it's negotiating your next job, your next salary, your next M&A transaction, or negotiating with your kids to go to bed or eat their broccoli, Vicki is going to help us with that. So watch your email this afternoon. We're going to send you a link. Click on that to get your free Vicki Medvec book. It's really fantastic, my friends.

Then January 26 we're going to host Ken Crerar and our own Travelers' Pete Heard, head of distribution, on how insurance agent brokers will be able to succeed in 2022 and thrive. So don't miss Ken Crerar, always a draw.

And then we're going to have a conversation with Johnson & Johnson CFO on February the 2nd. His name is Joe Wolk. He's been through the trenches with all of this vaccine development tax policy. And he'll take us behind the scenes of what J&J has been doing over the past year. It's going to be a fantastic session.

(DESCRIPTION)
Watch Replays: travelersinstitute.org. LinkedIn Connect: Joan Kois Woodward. Take Our Survey: Link in chat. hashtag WednesdayswithWoodward.

(SPEECH)
So I invite you all to connect with me on LinkedIn. And I want to thank you. We've had 44 programs over the last 18 months, and we've had thousands and thousands of you join. And we're just so pleased to be able to deliver content that's relevant, interesting, and with speakers and topics that you're telling us you want to hear from.

So shoot me a note, let me know who you want to hear from in 2022. We're building out a great program. You're going to see a press release come out with really cabinet secretaries and other really interesting people that we’ll announce beyond the three you see on the screen.

Have a happy holiday season, my friends. You could see I'm already skiing in Park City, and I really, really hope you get to spend time with your family and friends. Stay safe and healthy, and we're going to see you in 2022. Thank you.