Quite often in projects of a significant size, the contractor will be an entity established purely for the project (i.e. a special-purpose vehicle), or may be the subsidiary of an ultimate holding company.
In these circumstances, to minimise costs, the contractor may seek to rely on the ultimate parent company's policies as sufficient to satisfy its insurance obligations under the alliance agreement (global insurance limits are designed to be sufficient to meet future and current liabilities and insurers backing these global programs are acceptable to Australian Prudential Authorities).
This approach may be acceptable to the principal, provided that:
• the contractor is actually covered under the global insurance policies;
• the principal and Participants can, where appropriate, be included in those policies as an insured; and
• relevant coverage is provided or gaps can be dealt with (see (a) above).