Insurers set to team up on construction

Aviva and RSA have thrown their support behind a pilot project that would introduce integrated project insurance (IPI) for large government construction contracts.

ACE, AXA and Zurich have also agreed in principle to join the pilot in spring next year, along with brokers Griffiths & Armour and Tysers, if IPI is given the green light by government.

IPI would allow insurers to jointly underwrite a large construction project in a single policy, rather than a multitude of insurance contracts, which can often lead to costly legal disputes over claims payment.

The initiative is a key part of the government’s strategy to boost the flagging construction industry. It also aims to save the government 20% on public sector procurement costs by the end of this Parliament.

Trade body the Specialist Engineering Alliance’s (SEA’s) leader, Martin Davis, is heading negotiations with the government to introduce the integrated insurance.

“We will come across problems with anything that’s new,” Davis said. “But when it’s proved, it will be open to the whole insurance industry and construction projects. It’s radical, but ever so simple when you get down to it.”

Davis said the IPI pilots would involve between five and eight insurers. Representatives of insurers and brokers would also join the steering group overseeing any IPI pilots.

He said: “We’re not trying to push insurers towards something that’s not in their interest. The insurers have the opportunity here and now to have much more control and knowledge about the risk that they’re taking.”

Griffiths & Armour and Tysers have already played their part in the initiative by advising the government that insurers should flesh out a construction cost plan before underwriting the risk.

A cost plan aims to identify construction project costs in advance to help stop construction projects from overrunning or overspending.

Davis has been in close discussion with the government’s chief construction adviser, Paul Morrell.

The Government Construction Board, chaired by Morrell, is to set up a taskforce, including members of the insurance industry, to develop the IPI project. Progress updates are expected later this year.

Heath Lambert project risks director Mark Bourke said: “A key benefit to be realised by IPI is greater scrutiny by the insurer and his independent engineering team. The cost of this additional scrutiny will need to be borne by the industry, but undoubtedly will bring benefits and risk management improvements.

“Change will take time, but we look forward to hearing the outcomes of the pathway pilot projects.”

Construction Products Association chief executive Michael Ankers welcomed the IPI proposals.

He added: “It’s not a done deal, but it’s the most positive step we’ve had in the 30 years I’ve been involved in this.

“It has the potential to offer considerable benefits to the construction industry.”

Griffiths & Armour and Tysers declined to comment.