Contractor Insolvency is a risk to all projects and numerous exposures have been evidenced over the last year.
Protection from Contractor Insolvency poses significant questions for the Project Employer as to how best to design their insurance programme structure to mitigate the inevitable delay and financial impact.
Project Employers need to be very aware that they can lose project protection when a Contractor becomes insolvent. As a worst case scenario, project claims payments could be made to an administrator instead of the Employer.
How can you protect your project from Contractor Insolvency?
Latent Defects Insurance
A policy providing protection against unknown defects materialising in the property with effect from Practical Completion. As your own policy, Insurers pay you to rectify the problem even if the Contractor no longer exists. Any collateral warranties you previously agreed could be worthless.
Project Specific Contractors All Risk Insurance
If the Contractor is no longer available to complete the works, then the works insurance cover they provided will likely also cease. When a project specific works policy has been arranged by the Employer, the cover continues regardless of whether there is a change of Contractor during the build.
Integrated Project Insurance
The IPI collaborative and open book approach assists in mitigating the traditional construction and contractual risks, such as insolvency. This gives greater project certainty and provides benefits such as reduction in project length and cost overrun insurance.
Performance Bond Credit
A mechanism used to transfer the risk of key project team member’s insolvency to an insurance company to ensure funds are available to help deliver satisfactory completion of the project. This can also provide early warning signals of potential problems.
Single Project Professional Indemnity Insurance
Providing long term security of PI cover for the duration of the liability period. Removing the reliance on renewal of annual policies and incorporating effective dispute resolution mechanisms.
Contract Review / Due Diligence
Using an Insurance Professional to undertake due diligence and ensure that the contractual chain is solid, including analysis of any insurance protection offered.
Griffiths & Armour have a wealth of experience from advice to placement of Construction risk Insurance for residential, commercial and mixed use projects. We use a variety of markets to cater for the needs of your project.
MEET WITH US AT MIPIM 2019:
We will be at MIPIM for the duration of the Conference, and we can discuss the above in relation to your forthcoming projects.
Would you like to arrange a time to meet?