9.5  Links between collaborative procurement and project-based insurance

Professional indemnity insurance, in terms of availability, affordability and restrictions on cover, is a significant challenge for the industry. It is reported that this has been exacerbated by issues associated with the COVID-19 pandemic.

In order to mitigate some of the issues relating to professional indemnity cover, and also to encourage effective collaborative procurement, insurers have developed a number of project-based insurance products. For example, there are single project insurance policies targeted at property owners, developers and contractors, with a view to controlling the scope of risks to be insured. Such policies typically consolidate cover into one policy that is negotiated, purchased and managed by a single sponsor and may include:

■  Insurance of the works

■  Public liability insurance

■  Excess liability insurance

■  Non-negligence insurance

■  Existing structures buildings insurance

■  Advanced loss of rent/ additional cost of interest business interruption cover

■  Professional indemnity insurance

■  Environmental impairment insurance

■  Buildings defects insurance.

Available policies include owner-controlled insurance programmes ('OCIPs'). OCIPs enable the project principals to purchase construction all risks and third-party liability cover on an all-party basis. Insurers suggest that these products can promote collaborative behaviours among project team members through, for example:

■  More transparent insurance costs controlled by all project principals

■  Greater flexibility to accommodate changes in project cost and duration

■  Cover designed on a project-specific basis

■  Control for project principals over the insurer and the level and type of cover

■  More expeditious claims-handling, mitigating the potential for disputes.

Project insurance can include delay in start-up cover for loss of revenue or other consequential costs incurred when the completion of a project is delayed. A specific policy of 'integrated project insurance' was created to support the IPI approach to collaborative ESI on the Dudley College Trial Project. This procurement model involves active participation by an insurer and its appointed technical assessor and financial assessor. The scope of the cover includes 12 years of latent defects and also cost overruns against the target budget, insured on a non-recourse basis alongside a contractual maximum pain-share liability for each team member including the Client.