The NSW Government provides construction insurances over its capital works contracts on a Principal Arranged Insurance (PAI) basis. Since 2012, Insurance for NSW has offered PAI, to ensure a robust insurance program is in place to indemnify against the financial impact of construction claims.
All NSW Government agencies choosing to insure on a PAI basis must procure their insurances through icare CRIF, as per Treasury Circular TC16/11. Furthermore, all NSW Government capital works valued $10 million or above must be insured on a PAI basis.
State-Owned Corporations must prove they can obtain better value for money elsewhere if seeking PAI outside of the icare CRIF.
How PAI works
The project owner (principal) buys a single insurance policy that covers the NSW Government agency and the multiple contractors engaged throughout the project for the risks of construction (i.e. material damage, public liability, environmental indemnity and others where applicable).
For small capital works projects under $10 million, agencies may choose between obtaining PAI with Insurance for NSW and relying on contractor-controlled insurances.
The majority of major projects around Australia are now insured on a PAI basis.
When to involve Insurance for NSW
Projects valued at $100 million and under
For projects valued below $100 million, project owners are required to advise Insurance for NSW when the Request for Tender documents are ready for release.
This needs to include the scope of works, value, start and end dates. After this initial advice, we also need to be informed of the head contractor.
Alternatively, we’ve created an online facility for agencies to produce quotes, bind cover as required, generate policy documentation and store project-specific information. Please contact us for access to this system.
Projects valued at $100 million and above
For projects at or over $100 million, Insurance for NSW needs to be more involved at an earlier stage. Advise us at the initial planning phase and we can work with your agency to develop a detailed profile of the project’s risks.
We collect premiums and meet the cost of claims. The need for insurance is removed from contractors, which lowers their costs, while premiums payable are retained by government. There are also economies of scale in having a single provider of cover done on a not-for-profit basis for all major NSW government projects.
PAI-related risks can be more proactively managed with the NSW government both owning the risks and insuring against them through icare. We make sure insurance policies remain current through the life of a project and mitigate complex issues surrounding loss or liability.
Risks are reinsured through a large reputable network of APRA-regulated reinsurers and international reinsurers.