The assessment of the insurance cover should not be driven by the cost of insurance. However, the cost of the insurance is an important consideration because it directly affects the project outturn costs. The insurance cover cost is driven by many factors:
• The capital supply in the insurance markets for the type of cover sought will be a factor.
• The insurable risks identified during the risk analysis will largely determine the scope of coverage of the insurance procured.
• The scope of coverage of the insurance, and in the case of professional indemnity, the trigger for calling on the coverage, will have a direct impact on the cost of the insurance.
• The limits of cover and timing of the insurance cover will directly affect the cost of the insurance cover.
• The security of the insurer from whom cover is purchased.
The primary test to be applied when assessing the appropriateness of the insurance cover is whether the insurance is best-for-state. A secondary test should also be undertaken by adopting the balanced decision criteria.