Government specified insurance

Government specified insurance is one of the risk-financing arrangements the Government of Canada uses in its contracting. Under it, Canada self-underwrites its own risks, which means it carries them itself rather than buying commercial cover. It also specifies the types of insurance and the minimum coverage limits that the contractor must maintain while performing the work.

The CanadaBuys Buyer's Guide describes the arrangement under its liability and risk management guidance. For suppliers, the practical point is simple: the government decides what insurance the contract requires, and the contractor is responsible for buying it and keeping it in place.

How it differs from the other two insurance arrangements

CanadaBuys sets out three risk-financing options that Canada exercises in contracting. Government specified insurance sits in the middle of the three.

• Contractor-controlled insurance: Canada self-underwrites its risks and leaves the contractor to decide what insurance it needs.
• Government specified insurance: Canada self-underwrites its risks but prescribes the insurance types and minimum limits the contractor must maintain.
• Government-controlled insurance: Canada purchases and controls the insurance, usually for a project involving multiple parties.

The dividing line is who decides. In the first option the contractor decides, in the second Canada sets the floor, and in the third Canada buys the cover itself. The CanadaBuys Buyer's Guide is the clearest current source for these distinctions.

Work that calls for specified insurance

The former Treasury Board Risk Management Policy stated that insurance requirements should generally be specified in tender documents and contracts when the work involves inherent risks that are closely associated with, and identifiable to, the contract. The policy named several situations:

• most construction contracts;
• work performed to particular government specifications;
• work involving extraordinary danger to the public; and
• work outside the contractor's normal operations.

These examples are published in the Treasury Board policy text. They show the logic behind the approach: where a specific, foreseeable risk comes with the job, the government states the protection it expects rather than relying on the contractor's own judgment.

What the insurance requirements cover

The former policy directed contracting authorities to prepare insurance requirement schedules. Each schedule addresses three things:

• the type of coverage required;
• the extent of coverage, which is the minimum limits; and
• the deductibles.

Those three elements are what a bidder should expect to find when a solicitation uses government specified insurance. The sources do not establish a single Canada-wide list of mandatory policies or limits. The requirements depend on the procurement and its risk profile, so each solicitation must be read on its own terms.

Status of the Treasury Board policy

The Risk Management Policy that described this approach in detail is marked rescinded. Its guidance is therefore historical policy guidance and not a current mandatory Treasury Board requirement. The current description of the arrangement comes from the CanadaBuys Buyer's Guide, which continues to present government specified insurance as one of Canada's contracting risk-financing options. The rescinded text remains useful for understanding which kinds of work led contracting authorities to specify insurance and what the requirement schedules were meant to contain.

What it means for a supplier bidding on Canadian public contracts

The solicitation or the resulting contract, not the general term, will normally identify the required policies, minimum limits and any deductibles. Read the insurance requirements early in the bid process. Confirm with your broker that your existing programs meet the stated types and limits, and that you can maintain them for the full contract period. Where the work is construction, built to government specifications, dangerous to the public, or outside your usual operations, expect the insurance schedule to be a significant part of the contract. A supplier that cannot meet the specified coverage is carrying a compliance risk, because the contractor must maintain the insurance in accordance with the contractual requirements.