Insurance levels for public sector contracts

The rule that matters most

Under the Procurement Act 2023, which governs most public buyers in England, Wales and Northern Ireland, a buyer cannot require insurance relating to the performance of the contract to be in place before it awards the contract (section 22(3)(b)). The government's guidance on conditions of participation explains why: to stop businesses paying for cover with no guarantee of winning.

That does not mean insurance can be ignored. The same guidance says a buyer can make it a condition that you will have the required levels when the contract starts, and can ask for evidence, such as a certificate for cover you already hold or a letter from an insurer confirming it would offer the cover, with your commitment to take it out. If you rely on a letter, the buyer must verify that the insurance is in place before it awards you the contract. Insurance the law already requires, such as employers' liability, can be required too.

The covers you will be asked about

The first four are the ones listed in the government's standard selection questionnaire (PPN 03/24). Cyber insurance is not on that list; if a tender asks for it, read carefully what cover it defines, because policies vary in what they include.

Employers' liability: the legal minimum

Most employers must hold employers' liability insurance with cover of at least £5 million (regulation 3 of the Employers' Liability (Compulsory Insurance) Regulations 1998). It must come from an authorised insurer. You can be fined £2,500 for every day you are not properly insured and £1,000 for not displaying the certificate, which you can do on your website or intranet (GOV.UK). You do not need it if you only employ a family member, or someone based outside England, Scotland and Wales (GOV.UK). Northern Ireland has its own rules, with the same £5 million minimum (HSENI).

If you have no employees, say so in your answer rather than leaving the box blank, and explain which covers you do hold.

What levels buyers ask for

There is no national table of insurance levels. Each buyer sets them for each contract, and they must be proportionate to the nature, complexity and cost of the work (section 22). The government's earlier selection questionnaire guidance, written for the regulations the Act replaced, said the same thing in plainer terms: set the level case by case, reflect the nature of the work and the risk, and be able to justify any requirement above what the law demands (PPN 03/24, paragraph 69).

Three real examples show how far levels can differ:

• The Crown Commercial Service model insurance schedule for frameworks under the Act starts at £10 million each for professional indemnity, public liability and employers' liability, with a note telling buyers to adjust it for each procurement (Joint Schedule 3).
• Cumberland Council's guidance to its own managers recommends public liability of £2 million and employers' liability of £5 million for low-value administrative contracts under £100,000, rising to £5 million and £10 million for other contracts, and £10 million public liability for hazardous work. It also says limits should follow the risk, not the contract value.
• Buckinghamshire Council's terms for consultancy bought by purchase order ask for public liability of at least £5 million and employers' liability as the law requires (clause 7.1).

If a level looks out of proportion for a small, low-risk contract, ask a clarification question before the deadline, explaining the risk in the work and the cover you hold. Proportionality is a legal test, so it is a fair question to ask.

Answering "confirm you have or will obtain"

The standard questionnaire asks you to confirm, for each type of cover, whether you already have it at the stated level or can commit to obtaining it before the contract starts (PPN 03/24, question 7.1). The answer is a yes or no for each line. That questionnaire was written for the regulations the Act replaced, but you may still meet the same wording, and the question is the same whatever words the buyer uses.

Before you tick yes

• Ask your broker what raising each cover to the stated level would cost, and how quickly it could start.
• Check the basis of the limit (each and every claim or aggregate) matches the tender's wording.
• Build any extra premium into your price: it is a cost of the contract.
• Only tick yes if you will genuinely take the cover out on winning.

Each and every claim, or aggregate

A limit written on an each and every claim basis applies to every claim separately, without limit to the number of claims: that is the wording Buckinghamshire Council uses for public liability (clause 7.1). An aggregate limit is the most the policy will pay for a claim or series of claims during the period of insurance (Cumberland Council), so a claim on one contract can use up cover you were relying on for another.

Buyers know this. The Crown Commercial Service schedule requires aggregate cover to be kept at the minimum, and asks you to tell the buyer and propose a solution if an unrelated claim is likely to take it below that level (paragraph 5). Read your policy schedule before you answer, and say which basis your cover uses if the tender does not.

Professional indemnity needs two more checks. Its limit is usually expressed as an aggregate for each period of insurance, and a buyer may require it to continue after the work ends. The Crown Commercial Service schedule requires it for at least six years after the contract ends; Cumberland Council's guidance suggests six years for most services and 12 years for construction services such as architects and surveyors. Ask your broker what that means for your premiums before you commit.

What to send

• Certificates or schedules for your current cover, showing the insurer, policy number, limit of indemnity, basis and expiry date.
• Your employers' liability certificate.
• A broker's or insurer's letter confirming any increased cover would be offered, if you are relying on raising it after award.
• Confirmation of any clause the contract asks for: the Crown Commercial Service schedule, for example, requires public and products liability policies to include an indemnity to principals clause covering the buyer.

Once you win, expect to keep providing evidence. Under the same model schedule, evidence is due at the start of the contract and within 15 working days after each renewal. Keep your certificates with the rest of your bid library: what you need before you bid covers the full set, and winning your first contract explains what else a buyer cannot demand up front. Find contracts to bid for with the tender finder.