What is an OCIP or a Wrap-Up?


Is an OCIP a viable mechanism to reduce cost of risk? Is an OCIP utilized more than a CCIP? Does an OCIP improve contractual risk-transfer? Obtaining definitive answers to these questions has baffled risk managers for decades. You would think since wrap-up insurance programs have been used on projects for over fifty years these questions would have specific answers. But, the answer is, “it depends!”


This is the introduction to a series of posts I’ve entitled, “OCIP 2.0 – Building a Better Wrap-Up”. Hopefully, these articles/posts will provide you with insights to increase your cognizance of what is required to design, structure, implement, and manage an effective owner controlled insurance program (OCIP) on your construction project.


But, before we jump into this knowledge-transfer process, a little history is warranted.


After spending the first decade of my career in the construction industry working with construction and engineering firms, and shortly after completing my MBA in finance, I was recruited into the insurance industry to develop construction insurance programs. This was an exciting time in my career to be able to augment my practical construction project management experience with new risk-transfer and risk finance methodologies.


I was especially intrigued with owner-controlled insurance programs (OCIPs), and how an OCIP can be used as an alternative to traditional insurance on construction projects.


Although, it wasn’t until I was a risk manager and owner’s representative that I fully realized that regardless of how good your OCIP insurance program structure is, if you have weak project management, a poor implementation, or haphazard administration processes, you will not achieve any of the potential benefits of an OCIP on your project.


About the same time that I originally established C-Risk, I had published several articles in construction industry publications on owner-controlled insurance programs (OCIPs) aka, Wrap-Ups. I wrote those journal articles to educate CFOs, and other construction professionals on the potential benefits of using an OCIP as a risk financing approach in lieu of using a traditional contractor-provided insurance program. OCIPs, if structured properly offer enhanced controls and can potentially reduce project insurance costs.


Those OCIP articles helped many CFOs and project owners become knowledgeable about OCIPs, not only about the procurement and placement of insurance coverages, but to help them determine if using an OCIP was the right approach for them for their construction projects. Those articles were written from a project owners perspective. These articles/posts will be written from a project owner’s perspective as well. They will provide project owners with some practical insights on advantages and disadvantages, feasibility, program structures, and other methodologies of using an OCIP on a project.


A lot has changed in the past decade in the construction industry. However, the use of an OCIP to wrap-up the construction project insurance is still a very viable approach. Project owners involved with large transportation infrastructure construction projects have more challenging risks to manage than residential and commercial developers. Public entity project owners especially need to know about OCIPs and how they can be used to manage project risks. The increased use of new project delivery methods such as design-build (DB) and creation of public-private partnerships with other variations like design-build-finance (DBF) or design-build-operate-maintain (DBOM), will stimulate a renewed interest in the use of OCIPs by public entity project owners for future projects.


Why are OCIPs more efficient to project owners to reduce inflated premiums expenses? Because, with an OCIP the project owner furnishes the insurance coverage(s), and a project owner can remove the gross premium costs submitted by contractors, which typically includes broker commissions and fees, and a contractor’s mark-up for OH&P.


With an OCIP, a project owner benefits from paying only the net cost of insurance. In addition, a project owner can maintain more control over the risk-transfer process. This is an attractive dynamic for many project owners who have the most skin in the game. On today’s major projects, this risk factor is a compelling reason for project owners to be knowledgeable about the proper use of an OCIP. The operative word here is “control”.


Using an OCIP, in addition to being an efficient and effective risk financing approach for risk-transfer with insurance coverages, it is a control mechanism. An OCIP will also reinforce safety management and mitigate subrogation claims on construction projects. Project owners will be equipped to better manage numerous risk factors with an OCIP.


I thought the best way to disseminate several contiguous articles on OCIPs is through a series of posts. I will publish these posts over the course of a couple of weeks. They will take you through a methodical process to convey what an OCIP is, why use an OCIP, and how to design and manage an OCIP to maximize your potential for achieving success. These posts will be pragmatic and will facilitate an OCIP knowledge-transfer process.


In addition, this series of posts will cover the individual elements of an OCIP. They will provide you with valuable insight on what I have learned about OCIPs over the years and what you need to know to keep you out of the weeds. I’m confident you will benefit from my lessons learned from inheriting some flawed OCIPs. That experience was very frustrating at the time, but it provided me with a unique perspective on do’s and don’ts. It also has enabled me to reverse engineer the flaws out of the OCIP design, formation, administration, and management processes. My goal in writing this series of posts about OCIPs is to help you in building a better wrap-up on your own construction projects.


Hope you enjoyed this post. I will look forward to your comments. I will share more Insights in future posts.

In OCIP 2.0 – Part 2, we will cover what’s an OCIP and why OCIPs are used.

Thank you for visiting and reading C-Risk Insights.

Until next time…




David Grenier is the Managing Director and Principal Consultant at C-RISK, LLC.

C-Risk is a risk management consulting company that provides strategies and insights on wrap-up insurance programs to help project owners in the public and private sector who are involved with large capital construction projects.


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