Government backs new project insurance

The government has backed proposals for a new type of single project insurance, first revealed in the last edition of QS News. The move means Single Point Project Insurance could be used extensively in the public sector.

The insurance policy aims to avoid disputes on construction projects by giving each party on the job a share of a collective pool of profit. If problems crop up on the project, they are paid for out of the collective pool. Beyond this, the insurer carries the risk of financial loss, subject to limited exceptions, such as a change in the project brief.

The Public Sector Construction Clients' Forum met to discuss the approach on 19 June and is understood to have come out in favour of it. The forum was set up by the Office of Government Commerce in January 2006 to improve procurement practices.

David Adamson, director of smarter construction, OGC, presented a paper to the forum advocating Single Point Project Insurance, which was written by Martin Davis, chairman of the Strategic Forum for Construction's integration steering group.

Davis developed the insurance policy in conjunction with broker Griffiths & Armour and insurer Tysers & Co but it has yet to be used. The approach puts all parties on a single insurance policy that includes the three main types of cover: project all risks, project professional indemnity and third party liability. This differs from the existing form of single project insurance, which includes only two forms: project all risks and project professional indemnity.