There are three core classes of insurance that form a PCIP:

Contract Works

This policy is designed to cover physical loss or damage to the contract works. If there is insured damage (e.g., a fire), this policy is designed to indemnify the insured for the cost of reinstatement of the damaged works. The standard insured parties are the owner/developer, lenders, the main contractor, and subcontractors. Any party with an insurable interest can be added as coinsured if
required.

Third Party Liability

This policy is designed to provide indemnity for legal liability following third-party property damage or third-party bodily injury arising from the works. The standard insured parties are the owner or developer, lenders, the main contractor, and subcontractors. However, if requested, any party with potential liabilities arising from the project could be added as coinsured. The limit to be purchased is a commercial consideration for the project but you should select this with due consideration for
the overall project exposures.

Delay in Start-Up

Many clients are concerned about the revenue they will lose if the project fails to complete on time. Delay in start-up insurance (DSU) is designed to indemnify the owner and lenders (if applicable) for financial loss following a delay in project completion, that has arisen from an event covered under the CW policy. This insurance can only be purchased as an extension to the CW policy and generally only where the owner has taken a PCIP approach. The sum insured can be selected to suit the project needs but will typically be revenue, gross profit (less any variable costs), fixed costs, additional financing or interest charges, and increased working costs (e.g., alternative accommodation). As noted previously, lenders will typically mandate this coverage, so DSU insurance is essential and usually non-negotiable where non-recourse project finance is employed.

Other insurances

A PCIP approach also allows the owner to take a proactive view on the risks and the availability of mitigation solutions, including insurance. Other insurance products that you might consider will vary depending on the location and the nature of the project. They might include:

• Environmental impairment liability
• Marine cargo/transit insurance
• Professional indemnity insurance (single project or owner’s protective)
• Political risks