The level of coverage for each insurance policy needed for a particular project will depend on the nature of the project and the associated risks. Most obviously, a high dollar value project that involves relatively high risks, and high impacts where risks arise, will probably warrant a higher level of cover.
However, as noted, project risk profiles can change, particularly in an alliance. For example, there may be an initial design phase that requires some insurances to be in place but not others. As a result, levels of cover deemed necessary can change. Particularly in alliancing, it is less appropriate to assume that parties can or should set a level of coverage for the duration of the project at the outset. It would be necessary to agree limits of cover at the commencement of insurance but of course these limits can be amended during the project if deemed necessary after further risk analysis has been carried out
Although insurance cover might be considered a largely commercial issue, a responsible approach calls for project-specific analysis and guidance for the best insurance arrangements. The level of cover needs to be derived based on appreciation of the project risks. The use of an insurable risk workshop to define project risks and to articulate the plausibility of each is the basis by which the maximum requirement for insurance limits can be derived. Prudent insured clients should ensure that the policy limit sufficiently addresses the Maximum Foreseeable Loss. Selecting a lower limit may be suitable provided this risk profiling exercise has been done.