Governments are undertaking large infrastructure projects using alliancing procurement methodologies. Each project and each alliance is different, with a different risk profile and risk treatment. Alliancing results in an unusual risk profile for the government when compared to other, contractually more straightforward, forms of delivery. Alliancing is most often used for projects that are considered to be high risk. This makes the role of insurance particularly complex.
More insurance is not necessarily better insurance, and Value-for-Money considerations are not straightforward. The true effectiveness of insurance is tested when a claim is made. For instance to date, first-party professional indemnity insurance for Australian alliance projects does not have an extensive history of claims experience to use as a basis for testing the effectiveness of the insurance. While this can be seen as positive for alliancing as a delivery approach, it does raise the question of the effectiveness of the cover obtained. If there have been very few claims, and a substantial number of projects have been delivered, then what risks are being effectively insured?