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The nuanced nature of setting PI limits in corporate construction programmes

Selecting the level of professional indemnity (PI) limits within a construction corporate programme is not always as straightforward as it can first appear. Learn more.

17/03/2026 · 7 minute read

Selecting the level of professional indemnity (PI) limits within a construction corporate programme is not always as straightforward as it can first appear. Contractors each have their own unique characteristics, shaped by sector focus, project delivery model, geographical footprint, and risk appetite.

A common contractor question we hear is: what are others purchasing in terms of PI limits? Benchmarking data can be a helpful reference. By definition, though, it shows what others have chosen based on their own sets of circumstances. An often-unstated assumption is that the peers included have thoroughly evaluated their exposures; the reality could differ, with organisations assessing their exposures to greater and lesser extents.

Contractors can benefit from adopting a strategic approach to PI limit-setting that accounts for the risk in their current portfolio and aligns with developments in their project pipeline and growth strategies. Setting a desired level of PI limits effectively requires:

  • Identifying coverage levels needed to fulfil contractual obligations;
  • Analysing the composition of the project portfolio (nature, complexity, and value);
  • Understanding how these elements combine to shape the overall risk profile; and
  • Considering market conditions (current pricing and capacity availability trends that can also impact the scope of coverage).

Why a PI study can be a strategic advantage for contractors

In today’s construction environment, PI exposures can impact a contractor’s financial stability and reputation. Conducting a comprehensive PI study is a strategic investment that can deepen understanding of risk, help to identify steps to optimise risk transfer, and strengthen long-term resilience against PI exposures.

Identifying and quantifying PI exposures through structured methodology

A PI study uses structured, data-driven methodologies to identify and quantify exposures specific to different sectors and project types. Through stakeholder engagement, project documentation reviews, and historical loss data analysis, contractors can gain a clearer, evidence-based view of where their greatest vulnerabilities lie — moving the discussion away from abstract risk perception toward better-informed priorities.

This approach makes sector-specific exposures easier to identify. For example, safety-critical design in aviation or healthcare projects carry a very different risk profile from fire and systems integration risks in battery energy storage developments. PI studies often reveal that exposure is concentrated at specific “risk touchpoints” (such as specialist design elements, late-stage design involvement, or commissioning) rather than being evenly spread across a project’s lifecycle. This greater clarity enables contractors to identify which activities represent genuine strategic PI exposures, and which do not.

Moving beyond contractual requirements

One of the most practical benefits of a PI study is its ability to align insurance strategy with a contractor’s portfolio fundamentals and delivery model.

Many contractors purchase only the contractually required PI limit, regardless of sector, complexity, or the potential severity of risks to the wider organisation. Organisations adopting this approach can potentially find themselves without coverage that would better support their recovery from a loss.

A PI study enables a risk-based, tailored approach to PI limits, linking proposed coverage levels to factors such as:

  1. Portfolio value
  2. Technical complexity
  3. Regulatory sensitivity
  4. Risk appetite
  5. Loss severity potential.

The result is a more precise assessment of insurance limit options in relation to exposure, which can support improved protection and greater cost discipline.

Strengthening subcontractor risk transfer and contractual alignment

Subcontractors represent a significant source of PI risk. A PI study provides a framework to assess subcontractors’ PI limits and policy wordings. Critically, a study may also reveal that the potential severity of a PI loss exceeds the insurance limits carried by specialist designers, leaving residual exposure with the main contractor even where work has been subcontracted. Seeking to align contractual controls and terms with insurance requirements can reduce the likelihood of gaps in risk transfer and improve recovery prospects when a claim arises.

Limits testing through loss modelling and probability analysis

More advanced PI studies incorporate statistical loss modelling and occurrence probability analysis. These techniques allow contractors to simulate severe but plausible loss scenarios and test whether various PI limits and insurance tower structures would absorb large, low-frequency events.

This analysis informs strategic decisions around retentions and enables contractors to stress-test their risk transfer strategy against emerging risks, such as new technologies or evolving regulatory regimes, before losses materialise.

From insurance purchase to more strategic risk management

The ultimate value of a PI study lies in its ability to connect risk identification, insurance design, and contractual strategy into one coherent framework. Rather than treating PI insurance as a static, annually reviewed purchase, contractors can use study outputs to shape how professional risks are retained, transferred, or mitigated over time — better aligning insurance spend with exposures and strengthening overall resilience.

Case studies

Background:

A large international contractor operating across multiple infrastructure sectors sought to better understand its potential PI exposure. Historical PI claims had been rare, but the contractor recognised that evolving delivery models (such as engineering, procurement, and construction (EPC) and progressive design-build contracts) and increasingly specialist design elements could materially alter its forward-looking risk profile. The organisation’s objectives were to assess its existing PI insurance programme and to gain a clearer view of where professional risks sat across sectors, project types, and contract structures.

Marsh solution:

Marsh conducted a structured PI study using a combination of stakeholder interviews, document reviews, and sector-specific risk analysis. PI risk scenarios were mapped across key project stages (design, procurement, construction, and commissioning) and assessed for potential loss severity and volatility. The analysis was supported by statistical modelling to test insurance limits at multiple probability thresholds.

The outputs included a sector-based PI loss scenario register, a risk-calibrated PI limit options matrix, and insights to better inform retentions, insurance tower design, and subcontractor risk transfer requirements.

Key takeaways:

  • Senior management was better equipped to move beyond insurance benchmarks to an evidence-based limit-setting rationale.
  • The organisation gained greater confidence that its strategic exposures were being appropriately managed and transferred in accordance with its risk appetite.

Background:

An international infrastructure contractor sought to assess its potential PI exposure across a diverse global portfolio. Despite having no historical PI claims and operating without dedicated corporate PI insurance, the organisation recognised that increasing project complexity and shifted contractual risk allocations could give rise to new exposures. Senior management wanted a data-driven assessment of PI as a potentially material financial risk and of cost-effective PI risk transfer options.

Marsh solution:

Marsh undertook a structured PI risk discovery and loss modelling exercise, involving in-depth interviews with senior technical, commercial, and operational stakeholders, followed by workshops. PI loss scenarios were identified and mapped across the contractor’s activities, with a focus on professional advice, design-related decision-making, and project oversight. Those scenarios were then used to develop a statistical loss model to assess exposure volatility and alignment with the firm’s risk appetite.

The outputs included a PI risk register, quantitative loss projections at multiple probability thresholds, and an assessment of risk financing options to aim to optimise insurance and retention.

Key takeaways:

  • Senior management better understood the scale and nature of PI risk.
  • Existing controls were assessed as sufficient to suit the appetite for risk, with risk transfer options to be considered on a project-by-project basis.
  • The study illustrated that the value of a PI review extends beyond insurance programme design; it may also support a conclusion to retain rather than transfer risk.

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