Last edited 16 Oct 2020

Integrated project insurance

Integrated Project Insurance (IPI) is an innovative insurance product which gives the IPI model its name. It collectively insures the client and all the other Alliance partners: consultants, specialists, manufacturers, construction managers and their supply chains. In particular it replaces liability-driven professional indemnity insurance (which requires proof of fault before responding) with financial loss cover where the outturn cost above the target cost plus pain-share is insured.

But IPI is only available as part of the IPI Model which is founded on the principle of a new and transparent partnership with insurers. In granting cover the insurers will have had regard to the following fundamental principles which the Alliance members (including the client) intend to comply with when undertaking the project:

In parallel with the Alliance members and their supply chains waiving rights to claim against each other, the insurers waive rights of subrogation against all the insured at every tier.

Under the IPI model the emphasis is on collective and transparent governance:

By virtue of the involvement of the IF, TIRA and FIRA, insurers have a close project relationship under the IPI Model. In essence they can have confidence based on independent expert advice that:

and they will receive early alerts to problems and potential overspends, and can participate in decisions over mitigation.

In return, insurers are prepared to agree a wider range of cover than under traditional project policies; they have an overview of all potential risks, and are in a better position to understand them. IPI insurers have been carefully selected by the brokers; their contracts are subject to utmost good faith; and they are expected to recognise and fund overspends promptly after they have been identified and verified by the FIRA.

Until the IPI product is fully established and a much simplified integrated format can be developed, the IPI policy comprises:


This use of known products is seen as an advantage in the early days of IPI as those who will benefit from the cover are better able to relate to the protection they are used to seeing.

The “financial loss” cover under the IPI policy has an agreed cap (limit of insurersindemnity), and its exclusions are limited to ‘normal industry exclusions’ which are:

Under the IPI Model each Alliance member participating in the gain-share/pain-share mechanism in the Alliance contract knows that his loss is limited to his pre-agreed share of the maximum pain-share. The benefits deriving from this policy should ensure that all parties concerned are open and honest about their allowances (usually in overheads) for omnibus insurances, and exclude them from the build-up of their target and actual overhead costs for the project so as to avoid cost duplication.

Under a study undertaken for the then Office of Government Commerce the combined premium cost of traditional construction all risks, public liability and professional indemnity insurances on a commercial development throughout the supply chain amounted to 2.5%. This was based on normal risks, and excluded excesses. The cost of IPI has been fixed at 2.5% of the project cost, which is better than cost-neutral because it also includes:

It also saves the cost of taking out collateral warranties. There is therefore no cost penalty for a client adopting IPI.

For completeness: due to its inherent variability, the study excluded insurances associated with feasibility or pre-project planning activities. The essential pre-initiation activity under the IPI model includes the assistance and support to the client in selecting and appointing the members of the Alliance and securing their understanding and commitment to the strategic brief and success criteria: this variable element is covered on a time-charge basis. The 2.5% fee then commences with a pre-inception instalment, with the balance payable upon inception of the IPI policy; because locality is also variable, fees are subject to reimbursement of expenses.

This article contains public sector information licensed under the Open Government Licence v2.0. The text is from Section 5, The Integrated Project Insurance (IPI) Model, Project Procurement and Delivery Guidance, 2 July 2014.

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