The Treasury
Category
NSW Treasury Circular
Identifier
TC16-11
Status
Active

TC16-11 Mandatory Principal Arranged Insurance (PAI) for all major capital works projects

Description:

This Circular requires all agencies, other than SOCs, to undertake Principal Arranged Insurance (PAI) through icare (on behalf of SICorp) for all government capital works projects estimated to cost $10 million or more. SOCs must demonstrate they can acquire PAI at a price more competitive than the price offered by icare.

Agencies, including SOCs, are able to decide whether or not to insure for projects under $10 million. However if they decide to insure projects under $10 million, PAI must be organised through icare.

FunctionFiscal Strategy and EconomicsSubjectFiscal Strategy

Construction insurance can either be a contractual requirement of the contractor or arranged by the client as Principal Arranged Insurance (PAI). The majority of major capital works projects being carried out in Australia today are undertaken on a PAI basis.

NSW is currently undertaking a number of large government capital works projects. To provide cost savings on these and other government capital works projects:

  • all agencies, excluding State Owned Corporations (SOCs), are required to adopt PAI for government capital works projects with an estimated total cost of $10 million or more;
  • all agencies, excluding SOCs, are required to take out PAI for projects with an estimated cost of $10 million or more through the NSW Self Insurance Corporation (SICorp), operated by Insurance and Care NSW (icare);
  • SOCs must demonstrate they can acquire PAI at a price more competitive than the price offered by icare;
  • agencies, including SOCs, are able to decide whether or not to insure for projects under $10 million; and
  • if agencies decide to insure for projects under $10 million through PAI, they must take out PAI through icare.

The steps agencies need to take and by when, and the project information agencies need to provide to icare will depend on the value of the project.