SPPI Insurance Malaysia: Single Project Professional Indemnity

A single structural design error on a RM50 million project can generate claims worth more than the engineer's entire annual revenue. If the engineer carries annual PI with a shared aggregate limit, one claim from a different project could exhaust the limit before this claim is even filed.

SPPI (Single Project Professional Indemnity) insurance solves this by dedicating a separate policy limit to one specific project. No limit erosion from other projects. No gaps if you change insurers between policy years. No coverage disputes about which policy year responds.

This page covers:

• What SPPI covers and how it differs from annual PI
• Who needs SPPI in Malaysia and when it's required
• How the claims-made trigger works
• Run-off periods and why they matter
• Premium factors and what drives cost
• Real claim scenarios from Malaysian construction
• How SPPI fits into your project's insurance programme

What Does SPPI Insurance Cover?

SPPI covers financial loss arising from professional negligence, errors, or omissions in the performance of professional services on a specific construction or engineering project. It responds when a third party suffers financial loss because of your professional mistake.

The key word is "financial loss." SPPI doesn't cover physical damage to construction works (that's CAR insurance). It covers the monetary consequences of professional errors: the cost to redesign, additional construction costs, delay-related losses, and legal defence expenses.

What SPPI does not cover: Physical damage to construction works (covered by CAR/EAR insurance), deliberate misconduct or fraud, contractual penalties not arising from professional negligence, and bodily injury to workers (covered by Workmen Compensation).

SPPI vs Annual Professional Indemnity: The Key Decision

This is the most important comparison for any construction professional. Both cover professional negligence. The difference is in how the limit works and how long the protection lasts.

The dedicated limit is the decisive advantage. If an engineering firm carries RM5 million annual PI and faces a RM3 million claim from Project A, only RM2 million remains for all other projects that year. With SPPI, each project has its own ring-fenced limit.

For high-value projects, many clients and financiers will not accept annual PI as a substitute for SPPI. The risk of limit erosion from unrelated claims is too high. Get a comparative quote for SPPI vs annual PI for your project.

Who Needs SPPI Insurance in Malaysia?

Any party with professional or design responsibility on a construction project has insurable professional liability exposure. The trigger is design responsibility, not job title.

The design-build trigger is the one most contractors miss. If your contract includes any design element, even just temporary works design, you have professional liability exposure that CAR insurance won't cover. A growing number of Malaysian construction contracts use design-build delivery, making SPPI increasingly relevant for contractors who historically only bought CAR.

When Is SPPI Required?

SPPI requirements come from three sources. Missing any of them can cost you the project.

Data centre projects are driving some of the largest SPPI requirements in Malaysia today. With investments exceeding RM100 billion across Johor, Cyberjaya, and Seremban corridors, DC developers routinely require consultants to carry SPPI limits of RM10 million to RM20 million per project. The technical complexity of data centre design (power redundancy, cooling systems, structural loading for server racks) means design errors can be extremely costly.

How the Claims-Made Trigger Works

SPPI operates on a claims-made basis, which is fundamentally different from how CAR, fire, or IAR insurance works. Understanding this is essential because it affects when and how you're covered.

This is where SPPI has a structural advantage over annual PI. With annual PI, you must renew continuously every year to maintain coverage for past projects. If you retire, close your firm, or simply forget to renew, you lose coverage for all prior work. With SPPI, the extended reporting period is built into the policy from day one. You pay once, and the policy continues to respond to claims for the agreed run-off period.

Extended Reporting Period (Run-Off): The Hidden Critical Factor

Professional negligence claims in construction often surface years after project completion. A structural defect may not become apparent until the building settles. An M&E system may perform adequately for years before failing under peak load conditions. Malaysia's Limitation Act 1953 allows negligence claims to be brought within 6 years from the date of discovery.

The extended reporting period (ERP), also called run-off cover, determines how long after project completion you can still report claims under the SPPI policy.

6 years should be your minimum ERP for any Malaysian construction project. Anything shorter leaves a gap between the end of the ERP and the limitation period. Some project financiers and sophisticated clients require longer run-off periods, especially for infrastructure and data centre projects where the financial exposure from latent defects is enormous.

Premium Factors: What Drives SPPI Cost

SPPI premiums are individually underwritten. There is no tariff rate. Each project is assessed on its specific risk profile. Understanding these factors helps you provide the right information at quotation stage and manage costs.

Indicative premium ranges: For a standard building project with a RM5 million limit, expect premiums in the range of RM15,000 to RM40,000 depending on complexity and profession. Major infrastructure or data centre projects with RM10 million+ limits can see premiums of RM50,000 to RM150,000+. These are indicative only; actual premiums depend on the specific risk profile.

Request a project-specific SPPI quotation from Foundation

Common SPPI Claim Scenarios in Malaysian Construction

Understanding how claims happen in practice helps you set realistic expectations and ensure your coverage is adequate.

Professional negligence claims are among the most expensive in construction. A single design error can generate claims worth multiples of the professional fees earned on the project. Without SPPI, the professional's personal and business assets are at risk.

How SPPI Fits Your Project's Insurance Programme

SPPI doesn't operate in isolation. It's one component of a complete project insurance programme. Here's how it interacts with other policies that your project needs.

For a comprehensive understanding of how CAR and EAR insurance works alongside SPPI, read our complete CAR insurance guide and EAR insurance guide.

Information Your Broker Needs for SPPI Placement

The quality of your SPPI placement depends on the information you provide at quotation stage. Incomplete submissions delay placement and may result in coverage gaps or higher premiums.

Submit your project details for SPPI placement

FAQ

What is the difference between SPPI and annual PI insurance?

SPPI covers one specific project with a dedicated limit that cannot be eroded by claims from other work. Annual PI covers all professional activities for the year under a shared limit. Choose SPPI for large, high-value projects where a dedicated limit and built-in run-off period provide stronger protection.

Is SPPI insurance mandatory in Malaysia?

Not by statute. But it's effectively mandatory for many professionals. BEM and LAM require registered engineers and architects to maintain PI cover. Large construction contracts, government tenders, and bank-financed projects frequently require project-specific SPPI as a condition of appointment or tender compliance.

How long does SPPI coverage last?

SPPI covers the project duration plus an extended reporting period (ERP), typically 3 to 12 years after project completion. Claims can be reported during the ERP for errors that occurred during the project. A minimum 6-year ERP is recommended to align with Malaysia's Limitation Act 1953.

What is a typical SPPI limit for Malaysian construction projects?

Limits are usually set at 10-20% of the total project value, or a minimum of 3 times the consultancy fee. A RM100 million project might carry SPPI limits of RM10-20 million. The specific requirement depends on contract conditions, scope of services, and the client's risk appetite.

Does SPPI cover construction defects?

SPPI covers financial loss from professional errors in design, specification, or supervision. It does not cover the cost of fixing construction defects caused by poor workmanship on site. That distinction matters: if a wall cracks because the design was wrong, SPPI covers the redesign and consequential costs. If it cracks because the contractor used wrong concrete mix, that's a workmanship issue covered under CAR insurance.

Can a contractor buy SPPI even if they're not a registered engineer or architect?

Yes. Any party with design responsibility on a project can purchase SPPI. EPC contractors, design-build contractors, and specialist subcontractors with design elements (facade, piling, ACMV) all have insurable professional liability exposure. If your contract includes design, you need SPPI regardless of professional registration status.

What happens if a claim is made after the SPPI policy expires?

If the claim falls within the extended reporting period (ERP), the policy responds. If the ERP has also expired, there is no coverage. This is why choosing an adequate ERP duration is one of the most important decisions when placing SPPI. Allowing the ERP to be too short to save on premium is a false economy.

How does SPPI interact with CAR/EAR insurance?

They complement each other but cover different things. CAR/EAR covers physical damage to construction works. SPPI covers financial loss from professional negligence. If a design error causes a structural collapse, CAR pays for physical repair/reinstatement while SPPI pays for redesign costs, delay losses, and third-party financial claims.

How quickly can SPPI be arranged?

Straightforward projects can be placed within 1-2 weeks with complete information. Complex or high-value projects requiring specialist underwriters or facultative reinsurance may take 3-4 weeks. Start the process early, ideally alongside your CAR/EAR placement, to avoid delays to project commencement.

Does SPPI cover delays and liquidated damages?

Some SPPI policies can cover delay costs directly caused by the insured's professional negligence. But liquidated damages and contractual penalty clauses are often excluded or subject to sublimits. This is a common area of coverage dispute. Always check the specific policy wording and discuss LD exposure with your broker during placement.

Foundation Conclusion

SPPI is the insurance that protects the brains behind the build. Every construction project depends on professional judgement, and a single design error can generate claims worth multiples of the fees earned. A dedicated policy limit, built-in run-off protection, and project-specific underwriting make SPPI the right choice for high-value Malaysian construction and engineering projects.

Foundation places SPPI for consulting engineers, architects, EPC contractors, design-build firms, and specialist consultants across Malaysia. We work with engineering underwriters who understand Malaysian construction practices, contract forms, and regulatory requirements.

Talk to Foundation about SPPI for your next project