OCIP's / Wraps - Insurance Programs

Overview

An Owner Controlled Insurance Program (OCIP) is a program where the owner purchases insurance for other participants in a construction project. OCIP’s also are sometimes called “wrap-ups”. An OCIP will cover the owners, contractors and subcontractors. An OCIP also may include design professionals. The coverage can include general liability (CGL), builders risk, worker’s compensation, terrorist, design errors and omissions as well as excess, umbrella and other special coverage.  OCIP's are becoming a standard feature in the construction industry promising cost savings.

An OCIP can be site-specific or it can be for multiple jobsites. Most OCIP's are multi-year programs with a set duration. For large construction projects, the most common duration is two to five years. And, the OCIP normally applies to all contractors and subcontractors performing work at the project jobsite. This jobsite is defined to include the construction site, all on-site fabrication shops, and associated material storage and lay-down yards

Over the past few years, design liability and environmental liability insurance have been bundled by some insurance carriers to provide professional and pollution coverage. In addition, some insurers have introduced subcontractor default liability policies into the OCIP mix as an alternative to surety bonds.

Potential Savings to Owners

It’s extremely difficult to determine the total savings an owner can realize from an OCIP because the potential savings can vary significantly based on a number of factors.

Savings are realized when contractors and subcontractors remove insurance costs from their bids because these bid reductions lower the contract price. The owner’s cost for providing workers’ comp, commercial general liability, and excess liability coverage on behalf of contractors and subcontractors will likely be substantially less than the deduction received from the contractors and subcontractors. The potential savings is the difference between the bid reductions and the owner’s cost of contractor and subcontractor-provided insurance coverage's.

Contractor and subcontractor bid deductions can vary between 2-5% of construction costs. However, the amount contractors and subcontractors spend on OCIP-provided coverage's will vary by geographic area, contractor size, and type of project.