For brokers, this creates opportunity, but also increasingly varied and complex construction exposures. One of the first questions when arranging Contractors All Risk insurance is whether the client is better suited to an annual policy or a project-specific placement. It can appear to be a simple question of convenience or price. In practice, the structure selected can affect how accurately the risk is presented, whether contract requirements are satisfied and how confidently the policy responds as the project changes.

When does an annual policy make sense?

An annual CAR policy can be an efficient solution for contractors undertaking a regular flow of similar work. Rather than arranging separate insurance for every contract, the contractor can insure eligible projects under one program, subject to the policy’s declared activities, maximum contract value, project duration and other parameters.

This can work particularly well where the contractor has:

• A consistent type of construction activity

• A predictable range of contract values

• Multiple projects beginning throughout the year

• Established risk management and reporting procedures

• No unusual contractual or technical exposures

• However, an annual policy should not be treated as automatic cover for every project the contractor accepts.

Before relying on it, the broker should check whether the new contract falls within the policy’s parameters. A project may exceed the maximum contract value, extend beyond the permitted construction period or involve work outside the contractor’s normal activities. A civil contractor moving into building construction, a commercial builder accepting a complex refurbishment or a contractor taking on a significantly larger project may require a separate underwriting conversation.

When is project-specific cover more appropriate?

A project-specific policy allows the insurance to be structured around one defined project. This may be preferable where the project:

• Has a high contract value

• Runs for several years

• Involves complex construction methods

• Includes extended and/or extensive testing or commissioning exposures

• Has unusual contractual insurance requirements

• Requires dedicated limits for the principal, financier or other stakeholders

• Project-specific cover can provide greater clarity because the policy period, insured parties, values, scope of works and relevant extensions are considered against the characteristics of that particular contract.

It may also prevent a significant loss on one project from affecting the limits available to the contractor’s broader portfolio.

Six questions brokers should ask early

Whichever structure is being considered, the quality of the outcome often depends on the questions asked before work begins.

1. What is the complete insured value?

The original contract price is only the starting point. The declared value may also need to contemplate principal-supplied materials, professional fees, temporary works, demolition costs, escalation, variations and other amounts for which the insured is responsible. If the project changes materially during construction, the insurance values may need to change with it.

2. How long could the project actually take?

The construction period should allow for more than the optimistic program submitted at tender. Approvals, supply constraints, variations and weather can all affect completion. The insurance arrangement should also consider testing and commissioning, handover, practical completion and any maintenance or defects liability period. An extension should be discussed before the existing policy period expires, not after.

3. Is this genuinely a new build?

Refurbishments, alterations and extensions often introduce exposures that are not present on a clear greenfield site. Brokers should establish whether the works connect to, modify or rely upon an existing structure. The ownership, condition and value of that structure should be clearly understood, together with responsibility for any surrounding property.

4. Who must be insured?

Construction contracts can require the interests of the principal, head contractor, subcontractors, financiers and other parties to be recognised. The names in the contract and the insurance policy should align. Brokers should also identify relevant indemnities, waivers, insurance clauses and contractual responsibilities rather than assuming that a broad description of insured parties will resolve every requirement.

5. What happens away from the site?

Materials may be manufactured, stored or transported before arriving at the project. If significant equipment, prefabricated components or imported materials are involved, the broker should establish where responsibility transfers and whether the proposed CAR arrangement addresses off-site storage and transit exposures.

6. What could turn a manageable loss into a major one?

The physical works are only part of the risk. Site access, neighbouring property, excavation, temporary works, fire protection, water damage controls, security, flood exposure and the sequencing of testing and commissioning can materially affect the size of a loss. Clear information about these controls allows the underwriter to assess the actual project rather than make conservative assumptions.

Technical underwriting should help the broker shape the risk

A useful underwriting conversation should do more than produce a list of unanswered questions. It should help the broker identify which details materially affect the placement, where the contract and proposed insurance may not align and whether an annual or project-specific structure provides the better solution. Engaging the underwriter early can be particularly valuable when the contract is still being negotiated. At that point, there may still be an opportunity to clarify responsibilities, amend problematic insurance requirements or gather the information needed to secure appropriate capacity. Once work has commenced, the available options can narrow quickly. A well-structured CAR placement is not simply a policy attached to a contract. It is an insurance solution that reflects how the project will actually be designed, procured, constructed and completed.

Scope Underwriting’s expanded Contractors All Risk capability includes annual and project-specific placements, supported by experienced local decision-makers and consultative construction underwriting.

For help assessing an upcoming contract or structuring a contractor’s annual program, speak with Nick, Rob or Sam at Scope.