One of the issues that arise where Participants rely on global or parent insurance policies is how the associated costs are identified or quantified, as well as how they are dealt with under the alliance agreement. For example, a global policy may literally cover all that party's projects all over the world and the premium paid for incremental additional projects will reflect this. Clearly, it is not appropriate for the entire premium to be a cost associated with the immediate project, or allocated solely to it. Alliance Participants may agree to:
• considering incorporating incremental policy costs into the corporate overhead and profit rate agreed between the Participants; and
• taking some percentage-based or incremental cost approach as a way of allocating a proportion of costs as a direct project cost for project purposes.
Where global policies are used, parties will have the usual issues to consider regarding precise policy terms and applicable limits, in particular, whether other claims made for other projects could exhaust the limits. Parties may seek to address this issue contractually by requiring relevant Participants to maintain specified levels of coverage at a 'net' agreed amount. That means the Owner, or perhaps Participants, need to be kept informed of other claims.
The broader issue of insurance cost in an alliance context is the way that insurance costs are allocated for the project. If insurance is a project cost, it still needs to be managed so that policies are put into effect on appropriate terms, at appropriate levels and at appropriate times, and maintained. Importantly, if insurance costs are an alliance budget cost item that has no impact on Non-Owner Participants, then the Owner Participant will be adversely affected if:
• insurances are not managed effectively;
• relevant claim and other information required from or in relation to Non-Owner Participants is not available or is not forthcoming; and
• insurance costs are adversely affected if a poor claims history of one or more Non-Owner Participants is revealed.
Parties can agree on project-specific arrangements to identify and manage these issues promptly in numerous ways. For example, it may be possible to identify material premium impacts attributable to one or more Participants or issues, and agree project-specific arrangements to:
• deal with that differential, so that other alliance Participants are not unfairly affected; and
• deal with relevant excesses in a particular way, depending on the circumstances of the claim.