Owner and contractor controlled insurance programs (OCIP, CCIP)
A US practice: the owner (OCIP) or the general contractor (CCIP) buys, for the whole project, the workers' compensation and liability cover each contractor would otherwise have bought for itself.
Boston, July 1997: the GAO notes that the 10.8 billion dollar estimate for the Central Artery/Tunnel, the Big Dig, relies on savings drawn mainly from its owner controlled insurance program, 778 million of which would not materialize before 2017. Two years later, the Department of Transportation's Inspector General issues a report on premium overpayments in that same program. The principle: instead of each contractor buying its own workers' compensation, general liability and excess, then passing the cost into its bid, the owner buys all of it once, for every contractor enrolled in the program, and asks them to price their bids net of insurance (bid deduct). The Federal Highway Administration adds builder's risk, pollution, professional liability and railroad protective liability. Auto and contractors' equipment stay outside. When the general contractor buys, it is a CCIP; when one program covers a series of projects, a rolling wrap-up. The savings come from retention. The owner keeps heavy per-claim deductibles, funds loss prevention and administers contractor enrollment, and a poorly run site wipes out the promised gain. The French single project policy is not the cousin it seems. It combines the owner's building damage insurance and the builders' ten-year liability covers, which respond after acceptance of the works; the OCIP targets workplace injury and third-party liability during construction, two risks that in France fall to social security and each firm's own liability policy.
Textbook case, in numbers. An 800 million dollar project: contractors would have built 2.5% of insurance into their prices, or 20 million, which they take out of their bids. The owner pays 11 million of premium, 1.5 million of administration, and expects 5 million of losses under its deductibles: 17.5 million, a saving of 2.5 million. If retained losses climb to 9 million, the program costs 11 + 1.5 + 9 = 21.5 million, and the owner loses 1.5 million against what the contractors would have charged.
OCIP, CCIP, wrap-up, wrap-up insurance, rolling wrap-up
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