Insurance due diligence and commercial assurance

05 February 2018 By Chris Lloyd, Executive Director at Willis Towers Watson

Insurance due diligence blog

Fundamental to any public procurement or contracting process is the objective of achieving optimum allocation of risk between the authority and its suppliers.

Insurance issues should be assessed by an insurance subject matter expert to ensure that risks are allocated to the party best able to manage those risks most cost effectively.

Insurance due diligence will ensure that the authority can be confident of the correct and consistent handling of insurance issues and transparency of insurance costs.  This will enable the authority to achieve value for money relative to treatment of insurance related issues during any procurement process or in relation to any contract entered into.
Principles of insurance and consistency of approach/contractual articulation will support the efficient and economical allocation and transfer of the authority's insurable risks to its chosen suppliers.  This will also ensure compliance with any internal authority or HM Treasury related policy guidance.

A detailed process of structured review and analysis will generally involve:

  • Development of insurable risk plans and insurable risk allocation strategies.
  • Analysis of risk registers, risk analysis studies to inform the authority required insurance programme design relative to the particular requirement of the contract in question.
  • Procedures to help the authority's personnel (and relevant advisers) identify risk issues / opportunities early on in negotiations thereby avoiding unnecessary acceptance of risk and improving the quality of commercial responses.
  • Drafting of workable and sustainable insurance obligations and insurance provisions in contracts.
  • Identification of "risk gaps" in contracts and potential solutions.
  • Workshops to train and help guide authority personnel in both insurance negotiations and in ongoing contract management requirements relating to insurance.
  • Engagement between the parties and their advisers on achievability (or otherwise) of proposals and contractual insurance solutions.

The benefits of insurance due diligence are:

  •  Improved overall contract risk management in support of the authority's governance and compliance with any relevant policy guidance and contractual relief mechanisms.
  • Demonstrable value for money with effective allocation of insurance risk and insurance cost transparency.
  • Improved financial and operational resilience with the confidence that supplier liabilities in contracts are backed by clearly defined quality insurance programmes and in the event of any claims or losses, the reassurance of funding via insurance.
  • Certainty of risk transfer and protection of the authority's separate interests using integrated treatment of risk identification, risk transfer, contractual mechanisms and other insurance issues in authority transactions.
  • Utilisation of specialist risk and technical insurance advisers who can engage directly with relevant legal and other professional advisers including knowledge transfer to the authority.
  • Respond quickly - resources to respond quickly to authority time pressures and requirements, avoiding potential contract default situations. 

Our Insurance Services Framework Agreement (RM3731) offers quick and easy access to associated brokerage services. Customers can use direct award and access pre-established pricing for the required services. For more information speak to YPO Category Manager Agnieszka Gajli on 01924 664675 or email [email protected].

Categories: Frameworks

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