Project-specific insurance, as the name suggests, involves taking out an insurance policy, or policies, specifically designed to address the risks associated with a particular project. This kind of product is tailored for the project, following a project-specific risk analysis, to provide comprehensive coverage that also takes into account the alliance agreement terms.
The advantage of project-specific insurance is that it accommodates the alliance principle of no claim between Participants. However, project-specific insurance is typically more expensive. Some Participants may argue that the premium can be justified, but others may consider the cost prohibitive. In practice, parties' attitudes to a higher-cost project-specific approach may be driven by the way insurance costs are dealt with under the alliancing budget and Risk or Reward terms. Government entities should appraise the likelihood of residual risks from the project and evaluate the cost of project-specific insurance against the magnitude and propensity for these risks to eventuate.