Owner Controlled Insurance Programmes (OCIP)
Why an OCIP is your best bet in bringing your development back to life
The construction industry has been through a hugely turbulent time, with confusion over COVID rules and now news of many contractors sadly going into administration mid-project.
As the construction industry heads back to work, this has meant new insurers need to be found, in order to provide the cover needed for existing projects to be completed.
Some developers have in-house construction teams, meaning they are able to cover the work and reduce setbacks if a contractor backs out or goes bust. However, it’s not just about the build itself. The collapse of a contractor mid-build will open up a quagmire of blame and costly debates if the wrong contractual option is selected.
Looking for alternatives
Looking for alternative insurance cover for a dormant site is never ideal but worse is having to cover claims costs at the same time as looking for a new contractor – or mothballing a project completely.
At Bridge Insurance Brokers, we try to educate developers on the alternatives that are open to them. We know that there are better insurance options, it just takes a little time at the beginning.
The norm for many is that insurance brokers behave reactively to lawyers, who will have advised developers on their building contract – and hence the insurance obligations within it.
With new builds in particular, the responsibility of identifying all potential risks and sourcing the right insurance product normally goes to the main contractor at the outset of the project.
This type of contract benefits the contractor, who retains all the control. On a contractor’s insurance programme a developer’s loss of profits and additional interest charges are not covered in the event of an insured claim. And in the event of a claim, the monies will go to the contractor, NOT the developer. It’s the traditional path, but that doesn’t mean it is the right one. Developers – and solicitors and financiers – need to be shown that there is a better way.
A better way
A newer, more comprehensive cover approach that we recommend is an OCIP (Owner Controlled Insurance Programme).
With an OCIP, the developer / site owner is in control and is covered more comprehensively for liability and loss. An OCIP covers a range of risks, from a delay in start-up to acts of terrorism, and means all knowledge about the policy – the excess, costs, cover and duration – lies with the developer, as opposed to the contractor. There is flexibility – and the beauty is that it is simply a case of changing the insurance option within the JCT.
OCIPs can be tailored to the project, and developers’ needs and premiums are agreed at the outset of the project – they basically deliver complete transparency, which is needed if large contractors fold. Sites insured without the subrogation issues that can arise under the traditional insurance proposition.
Developers – who operate in a world of urgency and profit margins – need to realise that a little time spent looking at all options at the start of a contract, could protect them from a world of pain and profit loss later on.
The whole industry is a little fraught and may be for some time. The traditional insurance route is quite simply no longer suitable. We need to ensure developers are less exposed.
By setting aside that time and allowing brokers to look around for the best OCIP, developers will remain insured if their contractors collapse, meaning the property owners’ interests remain protected, and they can focus on recouping their costs – and ultimately, getting the build finished.
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If you think your business could benefit from an Owner Controlled Insurance Programme and would like to learn more please contact:
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