Contractor Insolvency Cover
If you are a main contractor involved with a construction project, you may be required to provide some form of insolvency cover, or bond up to the value of the building contract or an agreed sum.
Contractor Insolvency Cover
If you are a main contractor involved with a construction project, you may be required to provide some form of insolvency cover, or bond up to the value of the building contract or an agreed sum.
This insurance provides peace of mind to the Developer, should a contractor become insolvent.
If this situation occurs, the bond provider will pay the reasonable cost (to an agreed sum) in relation to the contract price to complete the construction work.
Now more than Ever
As highlighted by the collapse of Carillion, contractor insolvency can be a risk not only for employers but on the wider construction industry supply chain.
The Coronavirus pandemic has had a catastrophic effect on the industry with the Government’s Insolvency Service recording more insolvencies in the 12 months leading up to March 2020 than any other sector.
Even with emergency legislation released by the Government to provide some protection from insolvency, the effects from the pandemic have only magnified the risk of contractor insolvency. No matter what part of the chain you are, if a contractor or sub-contractor goes bust on a project, everyone involved will be affected.
This highlights one of the many reasons why Developers should ensure their own insurance provides for contractor insolvency rather than rely on the contractor, as if insolvency occurs during the build stage, this can leave an employer at risk of being uninsured and potentially unable to get insurance cover.