Integrated Project Insurance (IPI) Griffiths & Armour News

Integrated Project Insurance (IPI)

Since 1994 successive governments have been wrestling with the problem of driving innovation and removing waste from the UK's construction industry. Griffiths & Armour statistics suggest that 80% of construction insurance claims consist of legal and forensic costs. In May 2011, the Government Construction Strategy was implemented, following approval by HM Treasury and the Cabinet Office, where one of the key proposals is IPI.

IPI is a new form of project insurance which will act as a catalyst to render the construction industry more efficient and cost effective. It will be available on projects where the consultants and key suppliers are appointed as an Integrated Project Team (IPT) from the outset.

In addition to covering financial loss over and above the agreed cost plan which results from material damage, IPI will also cover financial loss due to other causes such as building defects and cost overrun.

The policy is intended for operation on projects involving negotiated construction ‘target’ costs, incorporating ‘gain share’ and ‘pain share’ provisions for the IPT. All of the parties (the IPT and funders as well as the principal/client) will be insured so there will be no rights of subrogation. The IPT will thus be free of any ‘blame culture’ with there being no right to sue except in cases of fraud.

The insurers' interests will be safeguarded by independent technical and cost assurance advisers who will work alongside the insured to achieve an insurable entity and to fix a premium for the policy.

In the event of potential financial loss from cost overrun, gain share turns into pain share. Cost overrun loss above the pain share sum (up to any agreed cap) is underwritten by the IPI policy. Costs arising from client changes not approved as being insured will be excluded.

The benefits of IPI will include the elimination of:

  • joint and several liability in respect of the project as between the parties insured.
  • defensive contract documentation.
  • collateral warranties.
  • blame culture between parties.
  • retrospective forensic investigations for litigation purposes.
  • inadequate or inappropriate insurance polices in the supply chain.

IPI encourages a collegiate and collaborative approach to problem solving and lowers project finance costs through the ‘wrapping’ effect of the policy.

The procurement strategies are being tested by a number of demonstration projects. Griffiths & Armour, via our strong connections within the construction industry, has been working with the Government and construction insurance sector to develop and deliver this exciting new product which should strip expensive waste and cost out of the construction industry.

If you would like to discuss this new area of insurance, please contact us on:

Telephone: 0151 236 5656


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