The Owner will select the Non-Owner Participants against formal tender evaluation criteria.
It is recommended that the risk advisor and the insurance advisor also contribute in the alliance member selection process where appropriate in the commercial evaluation of tenders. This can provide an Owner with appropriate specialist advice about a potential Non-Owner Participant's approach to risk and insurance.
The Claims history of a proposed Participant in this selection may be relevant in relation to the cost and apportionment of insurance and this could be taken into account in member selection. The claims history may also indicate whether the proposed alliance member is a desirable and competent one or not.
It is important to be clear on the ownership of risk as part of identifying the alliance risks that need to be insured, and making sure there are no gaps between the alliance insurance and the Non-Owner Participant insurance. It is a common feature of an alliance to have collective ownership of all the alliance risks. In situations where the optimal approach is for the Non-Owner Participant to adopt ownership of particular insurable risk(s), it is important to ensure there are no gaps between the alliance insurance and the NOP insurance, and that there is no overlap of insurance (sometimes referred to as double insurance) because this naturally leads to unnecessary costs.
Being transparent and explicit about risk ownership while allocating risk will help achieve the right balance between the 'collective assumption of risk' principle and the best-for-state principle.