Strategies for insuring subcontracted works: Fid-Bau Portal

Strategies for insuring subcontracted works

Gaafar, Hisham K. / Perry, John G.

In the UK construction industry there are different strategies used in practice for the insurance of subcontracted work of which two predominate: one is for subcontracted work to be insured by both main contractor and subcontractor (model A) and the other is for only the main contractor to insure the subcontracted work (model B). The extent of use of these approaches is discussed and the rationales for them are presented in the context of research undertaken by questionnaire surveys and structured interviews. The paper provides a background to the requirements for subcontractor insurance found in commonly used forms of contract, including FIDIC. Four possible models of subcontractor insurance are identified and their relationships to the contract provisions in model forms is outlined. Two of the models have little practical relevance to subcontractor insurance and the reasons for this are given. About 75% of the main contractors in the research sample were found to adopt model A for all disciplines, although the reasons given were not entirely consistent. About 15% of the sample adopt model B for all disciplines and the remainder use different models for different disciplines. Again, the rationales for these choices were not found to be robust. The main conclusions are first that the choice of strategy for subcontractor insurance is highly independent of both the discipline and the selected form of subcontract, and second that some commercial decisions in this area may be sub-optimal. There is an unreconciled argument over the immediate commercial advantages claimed by many for model A and the potential for longer term reduction in insurance costs which might arise from the widespread adoption of model B.