Risk and Insurance policies

Risk and Insurance policies

Risk Management in Civil Engineering LNEC 19.11.2008 Risks and Insurance policies Jos Luis Montull Risk and Insurance Risk: it is not only the contingency or proximity of a damage (hazard), but also each and every contingency that can be subject of an insurance contract (Risk ) quantifiable ? the mathematical product of the probability of a damage taking place, multiplied by the consequences of such damage: R=PxC where: P = Probability of an event C = Consequences of that event Risks and Insurance policies Risk Management in Civil Engineering LNEC - 2 Risk and Insurance The Insurance is nothing else than a financial transaction by which a party, the policyholder (Insured), through a remuneration (the

premium), promises to himself or to a third party a payment or a reparation in case of risk producing damages. The other party (the Insurer) who makes this payment, takes a set of risks, and is able to compensate them according to the statistical laws. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 3 Risks-Matrix The Risks-Matrix: Major Risks. (Example) Risk Probability Intensity Risk Control Clasification Insurable Insurance Policy Absenteeism

and productivity decrease Almost sure Moderate Not adequate investment's shortage in I+D, TI, RRHH Possible Severe Not adequate Extreme Political inestability Rare Catastrophic Not adequate High Theft of goods

or money Almost sure Moderate Not adequate Extreme Yes No Manpower costs explosion Probable Moderate Not adequate Extreme No No

Specific sectorial risks: manipulation of materials, stress,.. Almost sure Moderate Adequate Key Executives travelling together Unlikely Catastrophic Risks and Insurance policies Extreme Not adequate No Extreme High

No No No No Yes No Yes Yes Risk Management in Civil Engineering LNEC - Yes 4 Risks-Matrix Risks Matrix: Major risks. INTENSITY PROBABILITY negligible Light

Moderate Severe Catastrophic Almost sure M H E E E Probable M M H E

E Possible L M H H E Unlikely L L M H E Rare L

L M H H L Low Risk Controlled by skilled workers and surveyors. Risks and Insurance policies M Moderate Risk Managed by middle staff. H High Risk General Managers attention is required E Extreme Risk The Board must be informed, and a permanent follow up is required.

Risk Management in Civil Engineering LNEC - 5 INTENSITY Risks hierarchy EXTREME RISK HIGH RISK MODERATE RISK LOW RISK FREQUENCY Risks and Insurance policies Risk Management in Civil Engineering LNEC - 6 how do we face the Risk? Retention: establishing enough reserves to overcome the possible losses n

tio p o 1 Risk op tio n 2 Transfer: negotiating a specific insurance in order to give external coverage to the possible occurrence of a loss. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 7 Retention or Risk Transfer Retention? Risks with high probability and low consequences. (Risks have to be taken or "self-insured" if they don't affect the financial stability of the company).

Risk Transfer? Risk with low probability and severe consequences (it is necessary to establish the limits of significancy of a risk for the company, individually and combined). Risks and Insurance policies Risk Management in Civil Engineering LNEC - 8 The Cost of the Risk Expected Loss Ratio Costs of the Risk Control Costs of the Financing of Risk Costs of Risk Reduction

Unexpected Costs % on Incomes Risks and Insurance policies Risk Management in Civil Engineering LNEC - 9 What happens actually? Feb 2005 A high number of companies never overcome a major loss, because of not beeing forewarned The important thing is not to find out who will pay (usually an insurance company), but to ensure that your business will not be forced to stop, that you will not loose either clients or suppliers and, even, that your competitors will not take advantage of the circumstance to finish off your business. Risks and Insurance policies Risk Management in Civil Engineering LNEC -

10 Risks clasification Identified and Known assessable. Identified and Unknown because it's difficult to evaluate its consequences. Unidentified and Unknown surely we will be surprised (development risks). Risks and Insurance policies Risk Management in Civil Engineering LNEC - 11 Particularities of Civil Engineering Risks are often 'Unknown' (identified or not), due to: Each project is different from the previous, always showing different elements (ground conditions, climate, workmanship)

Technological development and innovation are steady, both in machinery and in materials Frequently there is non-skilled labour in the lowest levels of the chain Use and maintenance are sometimes not as careful as they should. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 12 The Risk in Civil Engineering RISK FACTORS (material damages): what do they depend on? a) of Internal origin: SOURCE Project b) of External origin: CONSEQUENCES Works performance (incl. materiales)

Risks and Insurance policies Natural hazards (Acts of God) Acts of third parties Risk Management in Civil Engineering LNEC - 13 The Risk in Civil Engineering RISK FACTORS (material damages): what do they depend on? a) of Internal origin: on the quality of the project itself (its conception and design), not only regarding the future service's stresses, but also concerning the stresses during the construction phase, as well as the construction method chosen on the approach to the construction works: quality and adequacy of the resources (personnel, machinery, measurement instruments, etc), and on the planning, choice and supply materials and their control, etc. Risks and Insurance policies Risk Management in Civil Engineering LNEC -

14 The Risk in Civil Engineering RISK FACTORS (material damages): what do they depend on? b) of External origin: They DO NOT depend, in their origin, on the project and construction works (although in some cases they DO depend with regard to their probability of occurrence -example: acts of third parties-) and, in all cases, they also DO depend regarding the severity of their consequencies example: flood, earthquake, etc.-) Risks and Insurance policies Risk Management in Civil Engineering LNEC - 15 Construction All Risk Example: Risks distribution Negligence Malicious acts (from Insured) Natural Hazards

Political Risk Nuclear Risk Financial losses/ penalties electrical or mechanical failure Fire Theft, robbery Risks and Insurance policies Risk Management in Civil Engineering LNEC - 16 Construction All Risk Example: Risks distribution 'insurable' Risks 'not insurable' Risks Negligence Natural Hazards

Malicious acts (Insured) Political risks Nuclear risks Financial losses/ fines Fire Robbery, Theft Risks and Insurance policies Mechanical or electrical failure Risk Management in Civil Engineering LNEC - 17 Risk's analysis Deterministic analysis Based on scientific theories or empiric formulations: identical result if you take the same assumptions for the process (ex.: rust)

Probabilistic analysis Based on occurrence probability of different risk's scenarios, estimating their consequences (ex.: flood) Statistical analysis Based on previous experience on existing statistics of losses (ex.: personal accidents at work) Risks and Insurance policies Risk Management in Civil Engineering LNEC - 18 Pilars of insurance activity Sufficient statistical base Financial stability Risks heterogeneity Geographical compensation Risks and Insurance policies Risk Management in Civil Engineering LNEC - 19 Statistical base for the analisys Very difficult to

Study of historical losses apply to Civil Engineering, due to the analyzed particularities: - projects are all different , - climate conditions influence in each and every case, - heterogeneous coverages - etc. Risks and Insurance policies Number of losses. Date of occurrence and close date. Insured. Location. Description.

Branch, guarantee, policy number insurer. Split of losses's amount: - total losses, - insured losses, - not covered losses. - deductibles. - pay back from other insurers, - pay back from third parties, - fees. Risk Management in Civil Engineering LNEC - and 20 Exemple: Construction All Risk Losses >180.000 Risks distribution (period 1990 2001) SOURCE: Mnchener Rck 11% 6% 31%

19% 33% Fire/Explosion Workmanship Others Risks and Insurance policies Natural hazards Design Risk Management in Civil Engineering LNEC - 21 Engineering Insurance Policies 1. Annual policies (MB) Machinery Breakdown (BI-MB) Business Interruption, resulting from a loss covered under the MB policy (DOS)

Deterioration of Goods (EEI) Electronic Equipment (CPM) Contractors Plants & Machinery (CECR) Civil Engineering Completed Risks Risks and Insurance policies Risk Management in Civil Engineering LNEC - 22 Engineering Insurance Policies 2. Temporary policies (CAR) Construction All Risk (EAR)

Erection All Risks (CAR-ALoP) Advanced Loss of Profit in CAR (EAR-ALoP) Advanced Loss of Profit in EAR Comprehensive policies (BOT, BOO,..) Risks and Insurance policies Risk Management in Civil Engineering LNEC - 23 Engineering Insurance Policies 3. Multi-annual policies Decennial (10 years cover) Inherent Defects (2, 3 or more years cover) .... Risks and Insurance policies Risk Management in Civil Engineering LNEC - 24 Engineering Insurance Policies 4. Special policies

Off-shore Risks (Oil-Platforms, Undersea-Pipelines,...) Technological Risks (Manufacturer's Guarantee,...) Space Risks (Moon Shots, Space Stations, ...) Risks and Insurance policies Risk Management in Civil Engineering LNEC - 25 Civil Engineering Insurance Policies Construction All Risk (CAR) Target policyholder? each and every company taking part in the construction process (having interests on the construction itself) Owner / Promoter Main Contractor Subcontractors

Policyholders [actually, the 'insured' is the Construction itself] Risks and Insurance policies Risk Management in Civil Engineering LNEC - 26 Civil Engineering Insurance Policies Construction All Risk (CAR) what types of works can be insured? All kinds of works and facilities Housing and buildings: residential, offices, hospitals, schools, industrial buildings, car parks, shopping centers, stadiums, power stations, etc. Civil works, infrastructures: tracks (motorways, railways, pipelines, tunnels,...), bridges, hydraulic works (dams, water treatment plants,...), weet risks (breakwater, harbours,...), etc.

Risks and Insurance policies Risk Management in Civil Engineering LNEC - 27 Civil Engineering Insurance Policies Construction All Risk (CAR) what is/can be included under the coverage? All works, goods and tools which take part in the construction process or which are adjacent to the construction site: CONST.WORKS: stored goods & materials, works brought on-site as part of the contract (earthworks, foundations, structures and finishing,..) temporary works erected or constructed on-site,... MACHINNERY: cranes, bull-dozers, dumpers, pave-machinery... EQUIPMENT: hand and machine tools, scaffolding, frames, pumps, ...

EXISTING PROPERTY: in property or in custody of the insured (susceptible to suffer damages arising from the insured works) Risks and Insurance policies Risk Management in Civil Engineering LNEC - 28 Civil Engineering Insurance Policies Construction All Risk (CAR) SUMS INSURED: The construction work itself (main coverage): total contract value at the completion date to regularize a margin should be foreseen (long time works) Machinery (optional guarantee): List with following data: individual values (new replacement) identification, technical features manufacture year Risks and Insurance policies

internal elechtrical and/ormmechanical damage are excluded Risk Management in Civil Engineering LNEC - 29 Civil Engineering Insurance Policies Construction All Risk (CAR) SUMS INSURED Construction Equipment (optional guarantee): total value of set (new replacement value) (a list should be attached) no heavy machinery Existing Property (optional guarantee): "first risk value" (it should be sufficient for the reconstruction or replacement of the damaged goods) Risks and Insurance policies Risk Management in Civil Engineering LNEC -

30 Civil Engineering Insurance Policies Construction All Risk (CAR) SCOPE OF COVER It is an "all-less" policy (all damages are included, but the damages which are specifically excluded) Condition: Risks and Insurance policies Sudden and unforeseen physical loss or damage to the property insured, occurred during the period of insurance, in the construction site, due to any accidental cause not specifically excluded Risk Management in Civil Engineering LNEC - 31 Civil Engineering Insurance Policies Construction All Risk (CAR) SCOPE OF COVER which Risks are actually covered? Natural hazars

("Acts of God", based on a defined threshold) CONTRACT WORKS (basic cover) Risks arising in connection with the execution of the project (unless that ones excluded) CONSTRUCTION MACHINERY (optional cover) CONSTRUCTION PLANT&EQUIP. (optional cover) Risks arising from acts of third parties (unless that ones excluded) EXISTING

PROPERTY (opcional cover) THIRD PARTY LIABILITY (optional cover) G O O D S to be C O V E R E D against D A M A G E S Risks and Insurance policies Risk Management in Civil Engineering LNEC - 32 Civil Engineering Insurance Policies Construction All Risk (CAR) PERIOD OF COVER Main (basic) Cover Before Maintenance cover (optional) During construction works After const.w.

construction works guarantees previous storage completion of works inception of works Dowloading material on-site Risks and Insurance policies order of commitments with the works (for the main Contractor) Risk Management in Civil Engineering LNEC - 33 Civil Engineering Insurance Policies Construction All Risk (CAR) PERIOD OF COVER Main (basic) Cover Before

During construction works Natural hazars ("Acts of God", based on a defined threshold) Risks and Insurance policies Risks arising in connection with the execution of the project (unless that ones excluded) Maintenance cover (optional) After const.w. Risks arising from acts of third parties (unless that ones excluded) Risk Management in Civil Engineering LNEC - 34

Civil Engineering Insurance Policies Construction All Risk (CAR) PERIOD OF COVER Special cases (information required) : advanced works (status of works: progress, ...) extensions / delay (reasons, occurred losses) interruptions, suspensions (reasons, status of works, security measures,...) early termination phased handover Risks and Insurance policies (status of works, occurred losses) (situation, delimitations) Risk Management in Civil Engineering LNEC - 35 Civil Engineering Insurance Policies

Construction All Risk (CAR) MAIN EXCLUSIONS (1) Conventional exclusions war, armed conflicts nuclear risks expropiation, confiscation penalties (contractual or not) willful misconduct of the insureds or of the technical which are responsibles for the construction works consecuencial losses (indirect losses) documents, cash values Risks and Insurance policies Risk Management in Civil Engineering LNEC - 36 Civil Engineering Insurance Policies Construction All Risk (CAR) MAIN EXCLUSIONS (2) Specific exclusions Gradual deteriorations wear and tear 'normal' effects of climate rust or oxidation Defective design and workmanship (rectification) regarding materials

regarding designs , calculations and drawings Deductibles (always have to be borne by the insured) Risks and Insurance policies Risk Management in Civil Engineering LNEC - 37 Civil Engineering Insurance Policies Construction All Risk (CAR) MAIN 'PROBLEMS' Exemple 1 'Normal' effects of climat excluded but... what is 'normal'? Risks and Insurance policies Risk Management in Civil Engineering LNEC - 38

Civil Engineering Insurance Policies Construction All Risk (CAR) MAIN 'PROBLEMS' Exemple 2 Rectification of defective design or workmanship excluded but... what is the 'defective part'? Risks and Insurance policies Risk Management in Civil Engineering LNEC - 39 Civil Engineering Insurance Policies Construction All Risk (CAR) RISK ASSESMENT: An individual analysis is required for each construction work: configuration and exposition of the construction site

(natural hazards, acts of third parties,..) type of works and materials construction method safety measures in the planning costs assesment regarding several scenarios of losses Questionnaire and Application for Insurance Risks and Insurance policies Risk Management in Civil Engineering LNEC - 40 Civil Engineering Insurance Policies Construction All Risk (CAR) SPECIAL ENDORSEMENT (1)

To include some additional or extended cover (optional) 001 : SRCC (strike, riot and civil commotion) 002 : cross TPL 003 : 006 : maintenance visits extra costs of acceleration (overtime, night work,..) 007 : airfreight

113 : national transport 116 : contract works taken over or put into service 119 : existing property Risks and Insurance policies Risk Management in Civil Engineering LNEC - 41 Civil Engineering Insurance Policies Construction All Risk (CAR) SPECIAL ENDORSEMENT (2) To delimitate some covers and/or exclusions (some examples)

008 : structures in seismic zones 101 : tunnels, galeries, subsurface structures 104 : dams and water reservoirs 106 : sections 107 : camps and stores

109 : 110 : construction material safety measures (with respect 112 : fire-fighting facilities and fire safety on site 121 : piling foundations and retaining wall works Risks and Insurance policies to rain, flood and inundation) Risk Management in Civil Engineering LNEC - 42

Civil Engineering Insurance Policies Construction All Risk (CAR) SPECIAL ENDORSEMENT (3) To exclude directly some usual coverages 009 : 010 : 103 : Risks and Insurance policies damages arising from earthquake damages arising from flood and inundation damages in crops, forest and cultures Risk Management in Civil Engineering LNEC - 43 Civil Engineering Insurance Policies Civil Engineering Completed Risks (CECR) Target policyholder? the owner or the operating company What types of works can be insured?

civil works, infrastructures, with a low fire risk Risks and Insurance policies Risk Management in Civil Engineering LNEC - 44 Civil Engineering Insurance Policies Civil Engineering Completed Risks (CECR) SCOPE OF COVER It is a policy that covers "nominated risks" (a risk is covered only if it is referred specifically in the policy): Unforeseen and sudden physical loss or damage caused during the period of insurance by: a. Fire, lightning, explosion, impact of landborne or waterborne vehicles b. Impact of aircraft and other aerial devices or articles dropped therefrom c.

Earthquake, volcanism, tsunami d. Storm (air movements stronger than grade 8 on the Beaufort Scale) e. Flood or inundation, wave action or water f. Subsidence, landslide, rockslide or any other earth movement g. Frost, avalanche, ice h. Vandalism of single persons. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 45 Civil Engineering Insurance Policies Civil Engineering Completed Risks (CECR) BASIS OF LOSS SETTLEMENT a) in case of damage wich can be repaired:

the cost of repairs necessary to restore the items to their condition immediately before the occurrence of the damage(less savage and r.o.d.) b) in case of a total loss: a) If the loss occurs within the period stated in the schedule the replacement costs b) If the loss occurs after the period stated in the schedule the actual value of the insured items immediately before the occurrence of the loss (less savage) -> [deducting a proper depreciation from a)] Risks and Insurance policies Risk Management in Civil Engineering LNEC - 46 Civil Engineering Insurance Policies Privately Financed Infrastructure Projects and Their Insurance PFI Privately financed investments Most important models: BOT

Build - operate - transfer BOO Build - own operate Examples of other models: BLT Build - lease - transfer ROT Rehabilitate - operate - transfer ROO Rehabilitate- own - operate DBFO Design - build - finance - operate Risks and Insurance policies Risk Management in Civil Engineering LNEC - 47

Civil Engineering Insurance Policies Privately Financed Infrastructure Projects and Their Insurance BOT and BOO In both models, a project company builds, owns and operates a plant. BOT: the plant is transferred to a public operator after a period of e.g. 15 years at a low price. BOO: a transfer is not intended. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 48 Civil Engineering Insurance Policies Privately Financed Infrastructure Projects and Their Insurance Typical for private financing of infrastructure projects : Sponsors invest only small fraction of the required capital Major funds borrowed from banks Liability of the sponsors in case of increased cost or delay in completion is limited Construction phase particularly critical: Major funds are spent without the project generating cash.

Risks and Insurance policies Risk Management in Civil Engineering LNEC - 49 Civil Engineering Insurance Policies PFI: Finance and Contract Structure Host Government (Principal) Banks/ Lenders loan agreement project agreement Project Company shareholders' agreement Sponsors Risks and Insurance policies insurance policy

Contractor construction contract supply contract Suppliers O&M contract Operator Insurers Risk Management in Civil Engineering LNEC - 50 Civil Engineering Insurance Policies PFI: Finance and Contract Structure A Project Company is formed to erect and operate the plant or the infrastruture by means of a network of contract agreements. It often is a stock company. Banks will provide the funds necessary beyond the Sponsors' investments. The Principal, i.e. the initiator of the project, may be the host government, a licencing governmental agency or a public utility. The Principal agrees the project terms with the Project Company. The Contractor and Operator are normally shareholders in the Project Company.

The Insurers are vital in view of the limited-recourse financing scheme. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 51 Civil Engineering Insurance Policies PFI: Flow of Payments (Operating Phase): Banks Sponsors Interest payments Interest and principal payments Project Co. Payment for fuel, materials and services Suppliers Risks and Insurance policies Price for

electricity Principal Risk Management in Civil Engineering LNEC - 52 Civil Engineering Insurance Policies Typical examples of PFI Projects large and communal: Commercially used buildings or civil works: - Large public buildings, hospitals - Air ports - Bridges, highways, tunnels Power stations (IPPs) and power distribution Water distribution and water treatment plants Risks and Insurance policies Risk Management in Civil Engineering LNEC - 53 Civil Engineering Insurance Policies

PFI Insurance Requirements: Privately financed projects have a higher need for security. The project partners require a comprehensive insurance cover. The insured for construction and operation is always the project company. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 54 Civil Engineering Insurance Policies Insurance covers of industrial projects Marine Insurance Erection/Contractor`s All Risk Ins. incl. Liability Cover Marine Loss of Profit Contractor`s Plant and Machinery Insurance

Transport Maintenance Cover Advance Loss of Profit Storage Construction/Erection Works Testing Guarantee Insurance Maintenance Operation Fire Ins. and Fire Loss of Profit Machinery Ins. and MLOP Electronic Equipment Ins. Workmen's Compensation Insurance Risks and Insurance policies Public and Prod. Liability Ins. Risk Management in Civil Engineering LNEC - 55

Civil Engineering Insurance Policies Staged Erection and Insurance Conventional Approach: 1st gas turbine + 200 MW Erection 2nd gas turbine + 200 MW Steam turbine + 200 MW / combined-cycle unit 600 MW total Risks and Insurance policies (Example of a combined cycle power plant) Commercial operation Tests Erection covers Operational covers Erection

Tests Erection covers Erection Commercial operation Operational covers Tests Erection (All Risks) covers Risk Management in Civil Engineering LNEC - Com. op. Op. cov. 56 Civil Engineering Insurance Policies Staged Erection and Insurance Typical PFI Approach: 1st gas turbine + 200 MW 2nd gas turbine + 200 MW Steam turbine + 200 MW /

combined-cycle unit 600 MW total Erection (Example of a combined cycle power plant) Commercial operation Test Erection Test Erection Com. oper. Tests Erection All-Risks cover Risks and Insurance policies Risk Management in Civil Engineering LNEC - Com. op. Annual operational

covers 57 Civil Engineering Insurance Policies LoP insurance for a PFI LoP is an essential cover due to the scarce financial resources of the Project Company ALoP difficult to monitor: Delays in early project stages may have - full impact - partial impact - no impact on the commencement of operation Requires detailed and updated project schedules Constant follow-up with insured and non-insured delays Suppliers Extension intensifies the problem: The EAR/CAR insurer is normally not the manufacturer's local property insurer

Risks and Insurance policies Risk Management in Civil Engineering LNEC - 58 Civil Engineering Insurance Policies LoP insurance for a PFI Time excess: ALoP: 60 days not uncommon, related to the total erection phase Operational LoP cover: 7 - 30 days, related to each loss event individually. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 59 Civil Engineering Insurance Policies What do the Banks ask for in a PFI ? a) the Project Company shall obtain the widest possible insurance cover from the market, b) the banks' or lenders' interests shall be included,

c) payment of indemnity shall be made to the banks or their trustees, d) all rights of recourse against the banks shall be waved, e) disregarding any right to refuse indemnity to the Project Company for any breach of conditions, the indemnity shall be paid to the banks including any loss of profits. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 60 Civil Engineering Insurance Policies In PFI, beware of terms which aim at: ! an invalidation of policy conditions which would release the insured project contractor from the usual obligations, ! a direct claim or direct influence of a party outside the insured project contractors or principal executing the works, ! the imposing of obligations on the insurers towards the banks. Risks and Insurance policies Risk Management in Civil Engineering LNEC - 61

Civil Engineering Insurance Policies PFI: Breach of Contract / Vitating Act in case of a Multiple Insureds Policy No indemnification of the violating party Other insureds to be indemnified for their direct loss Recourse against violating party not to be waived However, No indemnification of the banks Risks and Insurance policies Risk Management in Civil Engineering LNEC - 62 Civil Engineering Insurance Policies PFI: Multiple Insureds Clause (London Engineering Group) "In the event of any vitiating act committed by any one or more insured parties, the lenders shall not be entitled to any indemnity under this policy for or arising from loss or damage in respect of which insurers are otherwise no longer liable to indemnify..." Risks and Insurance policies Risk Management in Civil Engineering LNEC -

63 Civil Engineering Insurance Policies PFI: Who has an Interest in Insurance? The Principal Host Government Indirectly The Banks Indirectly The Project Company (manufacturers, site contractors, operators included) Project Insurances Risks and Insurance policies Risk Management in Civil Engineering LNEC - 64 Civil Engineering Insurance Policies Insurance from a single source Desirable for the Project Company No interfacing problems from one risk phase to the next

Comprehensive insurance scheme requested by the banks from the beginning However, ! Covers traditionally underwritten by different markets and branches ! Manufacturers, suppliers, hauliers, operators may engage their own insurers or brokers ! Local insurers normally more engaged in operational than erection covers Risks and Insurance policies Risk Management in Civil Engineering LNEC - 65 Civil Engineering Insurance Policies Insurance / Reinsurance Arrangement: Project Company Intermediary Project insurance

Package Policy P. Mar. Bond M-BI Credit Risks and Insurance policies Marine Direct Insurer CAR/EAR+BI MB/CECR+BI F F-BI Engineering Fire op. TPL Reinsurer Liability

Risk Management in Civil Engineering LNEC - 66 Civil Engineering Insurance Policies Mortgage default Legal protection covers Homeowners Liability (TPL) CAR/EAR A&E Liability Inherent defects Loss of Rent One-stop shop NatCat Real estate wrap-up protection Fire

Contractor insolvency Residual value insurance Risks and Insurance policies Vandalism Accident covers Bonds Risk Management in Civil Engineering LNEC - 67 Civil Engineering Insurance Policies Different treatement of damages by inherent defects in buildings in european area Is it necessary an insurance ? Property or Liability insurance ? voluntary or mandatory insurance ? Risks and Insurance policies Risk Management in Civil Engineering LNEC -

68 Civil Engineering Insurance Policies Decennial insurance in Europe Mandatory Insurance Sweden and Finland ? Voluntary Insurance In developpment U.K. Holland Benelux France Italy Portugal Spain Risks and Insurance policies Greece Turkey

Risk Management in Civil Engineering LNEC - 69 Civil Engineering Insurance Policies Example 1: France => mandatory dual insurance system indemnification Prom./User DO Ca. A Perito Experto Recurso DO DL Contractor X DL Ca.Aseg. X DL DL Ca.Aseg.Y

Liability share on damages between X and Y (CRAC) Contractor Y Risks and Insurance policies Risk Management in Civil Engineering LNEC - 70 Many thanks for your attention! Jos Luis Montull Mnchener Rck

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