In my experience, some of the most significant liability exposures don’t begin with the incident itself. They begin much earlier — with governance, culture and the decisions being made behind the scenes.
That is why the allegations surrounding major construction projects in Victoria should matter to every liability underwriter, broker, contractor and project owner in Australia.
The issue is bigger than the conduct of any individual organisation. Victoria has now established a Royal Commission to examine the nature and extent of corruption, criminal conduct and serious misconduct on or in relation to major construction projects, as well as the systems and frameworks that may have allowed it to occur.
For insurers, that raises an important question:
Have we been paying enough attention to governance when assessing construction risk?
From my experience, it is becoming increasingly difficult to separate governance from the underlying liability exposure.
Government project doesn’t automatically mean good governance
There has traditionally been a degree of comfort attached to major government infrastructure.
Large project. Sophisticated contractors. Significant oversight. Extensive procurement processes. Surely that translates into better controls? Recent events in Victoria challenge that assumption.
Serious allegations concerning conduct on major construction projects demonstrate why the size, profile or public ownership of a project cannot substitute for proper underwriting due diligence.
That matters because poor governance can amplify almost every liability exposure we already underwrite.
A weak contractor-selection process can introduce poor operators.
Weak supervision can allow unsafe practices to continue.
Poor documentation can make incidents harder to investigate and defend.
Conflicted decision-making can undermine contractual risk transfer.
And a culture where people are reluctant to challenge behaviour can allow relatively small problems to become very large ones.
Governance isn’t separate from liability risk. It is one of the things that shapes it.
The underwriting conversation needs to change.
For years, construction liability underwriting has understandably concentrated on the physical and contractual characteristics of the project.
What is being built? Who is doing the work? What are the activities? What are the limits? What does the contract say? What does the claims history look like?
Those questions remain fundamental.
But increasingly, they are not enough.
For significant projects, I also want to understand:
- Who actually controls key decisions?
- How are contractors and subcontractors appointed?
- How are conflicts of interest identified and managed?
- What happens when somebody challenges an unsafe or inappropriate decision?
- Is there meaningful independent oversight?
- Are whistleblower arrangements genuinely accessible?
- What audit trails exist around procurement and major project decisions?
- How are suspected fraud, corruption or regulatory breaches escalated?
- Has the project, principal or contractor been subject to regulatory investigation?
These aren’t theoretical governance questions.
They tell us something about how the risk behaves when nobody is watching.
And that is underwriting information.
Evidence beats assurances
At Australasia Underwriting, understanding the risk has always been central to how we operate. We don’t simply want another lengthy document telling us that a client takes governance seriously. We want to understand what actually happens.
Show us the process.
Show us the reporting structure.
Show us how contractors are selected and monitored.
Show us the audit trail.
Show us what happens when somebody breaches the rules.
That distinction matters.
A beautifully written governance policy is worth very little if the culture and controls underneath it don’t work.
The same principle applies to physical risk management. Having a fire-safety procedure doesn’t automatically make a building well protected. As underwriters, we want evidence that the controls actually operate.
Governance should be approached in exactly the same way.
This should influence underwriting — not become another exclusion
There is a danger that the insurance market responds to emerging risks by simply adding exclusions, questionnaires and warranties.
I don’t think that is the whole answer.
Good underwriting should differentiate.
A project that can demonstrate strong procurement controls, independent oversight, transparent decision-making and effective escalation procedures presents differently from one that cannot.
The purpose of asking better questions isn’t to make insurance harder to obtain.
It is to identify and understand the better risks.
And where concerns remain, insurers have options: additional information, risk-management requirements, conditions, deductibles, limits or appropriately structured coverage.
The objective should be better risk selection, not underwriting by exclusion.
Good governance is becoming an insurable advantage
There is another side to this.
For well-run businesses, increased underwriting scrutiny creates an opportunity.
Clients investing in genuine governance, transparent procurement, independent oversight and strong reporting structures should make that work visible to their broker and insurer.
Because governance is increasingly part of the risk story.
Historically, a construction submission might have concentrated heavily on engineering, contracts, experience and claims history.
Increasingly, I expect the strongest submissions to explain how the project is governed as well as how it is built.
That can become a genuine differentiator.
Brokers have a major role to play
This is where a good broker becomes particularly valuable.
The best brokers don’t simply send information between the client and insurer. They understand what concerns the underwriter is trying to resolve and help the client articulate the risk properly.
If a project has excellent governance, tell us.
Explain the procurement process.
Explain the oversight.
Tell us about independent audits.
Show us the reporting lines.
And if something unusual has happened, address it upfront rather than leaving the underwriter to discover it halfway through the process.
At Australasia Underwriting, we work exclusively through brokers, and we believe strongly in discussion rather than underwriting at arm’s length.
Complexity itself doesn’t frighten us.
Unexplained complexity does.
The earlier we can have the conversation, the more opportunity there is to understand the risk and build an insurance solution around it.
The bigger lesson from Victoria
The significance of what is happening in Victoria goes beyond individual projects.
The Royal Commission has been asked to examine not only the conduct that may have occurred but also potential weaknesses in operational, contractual, regulatory, licensing and statutory frameworks, organisational and workplace culture, procurement, subcontracting and oversight.
That is important.
Because systemic risk rarely announces itself neatly as an insurance exposure.
It appears through culture.
Procurement.
Contracting.
Oversight.
Financial incentives.
Workplace practices.
And eventually, if those controls fail badly enough, it arrives on an insurer’s desk as a claim.
That is why liability underwriting needs to look further upstream.
What should clients do now?
For businesses involved in major construction and infrastructure projects, I would focus on three things.
Make governance visible.
Give your broker evidence of how decisions are made, contractors are appointed, conflicts are managed and problems are escalated.
Underwriters need evidence, not assurances.
Make governance real.
Independent oversight, audits and reporting mechanisms need to operate in practice rather than simply existing in a policy manual.
Governance should be capable of being demonstrated through what the organisation actually does.
Talk to underwriters earlier.
Don’t wait until two weeks before inception to discover that an insurer has concerns about the project’s structure.
Early engagement gives everyone more opportunity to understand the exposure, address concerns and find solutions.
At Australasia Underwriting, we’re comfortable looking at risks that don’t necessarily fit neatly into a box.
But to do that, we need to understand them.
The earlier we engage, the better the conversation.
Underwriting the organisation behind the project
There is a broader lesson here for our industry.
We are very good at underwriting what businesses do.
We need to become equally good at understanding how they behave.
For significant construction risks, organisational culture, governance and decision-making are increasingly relevant to the liability exposure.
That doesn’t mean every project touched by a governance concern becomes uninsurable.
Far from it.
It means we need to ask better questions, distinguish between different qualities of risk and recognise clients that can demonstrate effective controls.
The issues now being examined in Victoria could prove to be an important moment for construction risk management and liability underwriting in Australia.
The insurance industry should learn from it.
Because good governance isn’t simply a boardroom issue.
It is a risk control.
And increasingly, it is an underwriting issue.
Let’s talk
At Australasia Underwriting, we like complex risks because complex risks create an opportunity to underwrite.
We bring Lloyd’s-backed capacity, experienced decision-makers and, importantly, a willingness to have the conversation.
If you’re working with a major construction or infrastructure client, talk to us early.
Show us the risk.
Show us the controls.
Show us how the project is governed.
Then let’s see if we can find a solution.
Steve Ross is the Head of Casualty at Australasia Underwriting Pty Ltd (AUPL), a national underwriting agency specialising in complex property and casualty insurance. Based in Melbourne, Australia, AUPL works with insurance brokers across the country to find solutions for complex risks.
