Contractor Insolvency is a risk to all projects, and has been emphasised through recent events with Carillion. Clearly this poses significant questions for the Project Employer as to how best to design your insurance programme structure to mitigate the impact of the insolvency risk of the Contractor and key Sub-Contractors. We have highlighted 5 key methods to assist with the risk:
Latent Defects is a worthwhile consideration for your projects and has the following benefits:
- Latent Defects Insurance – A policy providing protection against unknown defects materialising in the property with effect from Practical Completion. Insurers pay 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 provides greater certainty for the project, and includes benefits such as a more streamlined project delivery 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.
- Contract Review / Due Diligence – Using an Insurance Professional to undertake due diligence and ensure that contractual claims are 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
We will be at MIPIM 2018 in Cannes, France for the duration of the Conference, and we would be delighted to meet with you to discuss the above in relation to any of your forthcoming projects. Our team will be located in the Riviera Hall on the Invest Liverpool stand R7.G2 Would you like to arrange a time to meet?