Insuring a good deal

The prudent investor, having established a project company (Project Co) and secured the necessary funding to facilitate a public-private partnership (PPP) contract, in whatever sector, must always retain a commercial view; while being mindful of brand protection for all stakeholders. The management of financial risk before and during the construction period, plus the subsequent operational phase, is essential to achieve this goal. Having the right insurances in place, and partners in place to manage any claims, both have a critical part to play.


The investor, as Project Co, will surround itself with a team of professionals to ensure the correct contractual relationships are established with both the upstream user of any facility plus those downstream, for example a design and build contractor or Facilities Manager (FM) contractor for the operational phase. Throughout, the contractual matrix will always dominate and everyone involved will be aware of the risk transferal mechanisms.

Allied to the principle of risk allocation is the requirement for appropriate insurance. A suite of project-specific policies are utilised, recognising the interests of all stakeholders, to avoid complications which might otherwise arise from multi-party disputes and to control costs. These policies include:

Protection against the cost of reinstating material damage to assets that might be damaged or destroyed; Loss of revenue that the asset generates, and/or reductions in unitary charges, and; Third-party liabilities throughout the entire project life-cycle.


Having secured the best cover available, can the project team sit back and be assured of the right response to any given claim scenario? This is a question I have asked myself as a claims professional and Chartered Loss Adjuster of almost 30 years’ experience.

The key is whether a PPP facility, across any sector, or a portfolio of investment risks, presents a different type of loss management challenge? In the light of the specialised nature of the business model, the answer has to be ‘yes’. There are two key components to understanding how a claim can be managed:

The contractual matrix; Multiple stakeholders and the need to protect their different interests and/or brand reputation.

In the first instance, the contract is king: setting the parameters for asset renewal procurement and determining the financial consequences of unavailability. For example, procurement is often something which has to be created after a loss, but generally either the build or FM contracts dictate both the method of procurement and often its cost.

The contract should not be a barrier to efficient and cost-effective reinstatement, but an understanding of the defined roles will mean that the time taken to implement a solution can be reduced. The financial consequences are formulaic, and even if the full consequences of damage and repair times are unknown, an early estimation of loss can be made. This will allow for the consideration of an economic acceleration of repairs and will mean that the time taken to implement a solution can be reduced.

In terms of stakeholder management, any loss mitigation and innovative approaches to complex losses require consents from all stakeholders; and often fall within the parameters of lender governance. Cooperation and constant liaison with major stakeholders during the decision-making process is essential.


From an insurance perspective, there are three key points to the triangle: specialist brokers which develop the products; insurers with specific industry knowledge that underwrite the policy; and loss adjusters to both investigate and settle claims on behalf of the insurer. The loss adjuster brings a very practical perspective to any particular set of circumstances. A skilled and experienced loss adjuster can stand within the embers of, for example a burnt-out school, and bring early order to re-establish the entity in both physical and financial terms to the benefit of both the policyholder and insurer alike.

The placement of PPP project policies is a specialist task and claims professionals have responded in kind; recognising the need for the development of specialist adjusting practises, providing a greater depth of knowledge and sector experience. The specialist adjuster will bring together in-house resources to create a multi-disciplinary team and thus ensure that the appropriate response is provided for the particular sector; including but not limited to:

Construction professionals (both building and quantity surveyors plus
civil engineers); Mechanical, electrical and process engineers; Qualified legal practitioners and accountants.

The specialist adjuster should retain a controlling and coordinating role, ensuring the response is both appropriate in physical and financial terms, and contractually compliant. This is in itself a complex role, combining a number of separate loss-adjusting niche disciplines – for example, construction, engineering, material damage, third-party liability and financial risks.

Understanding the risk and the relationships between stakeholders is essential. To ensure the correct level of understanding is attained from the start, the specialist adjuster should be brought into the project at the outset. This means that they can work with the broker as wordings are developed and interact with stakeholders as construction commences to ensure claim notification procedures are put in place, procurement is understood and – through interaction – develop an appreciation of the nature of risk. That level of understanding will grow if the specialist remains involved through construction and into the operational phase.

All these are requirements for project-specific loss advice, delivered efficiently and in a manner which remains contractually compliant. Such front-loading is achieved when the specialist adjuster is the nominated claims handler for any project policy, providing a clear link between insurers and stakeholders/policyholders so that the uncertainties of a claims response can at the very least be minimised.


It is not hard to imagine the indecision that can result from limited knowledge and a proper understanding of the risk. Delay in the restoration of a public service not only has a financial consequence, but also carries a substantial reputational risk for everyone. There is still a keen public interest in PPP projects and an appetite to criticise. An efficient response minimises the risk of adverse commentary and therefore protects the brand of all stakeholders.

It is likely that Private Finance Initiative (PFI) consortia spend a significant amount of money on insurance and put a degree of effort into finding the right brokers and underwriters to ensure a sufficient level of insurance cover.

Partnering with experienced loss adjusters to minimise those risks is just as important. War stories are an adjuster’s stock-in-trade and often clearly demonstrate these principles. Having adjusted some of the largest PPP losses in the UK in recent years however, we understand that discretion is the better part of valour!

Undoubtedly, PFI projects will continue to provide unique challenges. However, strong relationships with the insurance community will provide private sector investors with a deeper understanding of the risks that they face and the best way forward for delivering a solution that retains a commercial outlook while protecting the reputation and brand of all stakeholders.

Mike Roberts is a managing director at Cunningham Lindsey International, the global loss adjusting and claim management firm.