Infrastructure insurance

The number and scale of global infrastructure projects currently underway have generated a variety of challenging risks for the construction industry. These risks include finding and maintaining skilled, specialist labour and ensuring that the most reputable contractors, with the right expertise, are available to deliver projects of a similar size and nature regardless of their geographical location.

Stakeholders must also consider the potential for supply chain failures to significantly impact project timelines, the complications that may arise at the point of integration, overlap and management of multiple contracts, and the delicate relationships that exist at the interface of the construction and operational phases of a project.

Construction projects can be highly complex, with many different elements of work to be coordinated in the finished project. The project team needs to display exemplary control and management of the construction process to ensure on-time and on-budget delivery. Such high-value, complex projects generate a myriad of asset, financial and liability risks.

While these risks can be dealt with in a variety of ways, including by allocating risk contractually or using risk management methodologies and techniques to mitigate the effects of the risk, this section is primarily concerned with insurance structures and types of cover that relate to the various risks arising out of a major infrastructure project. The core types of cover that relate to infrastructure project risk are as follows:

  • construction all risks/contractors all risks (asset risk);
  • delay in start-up/advance loss of profit (financial risk); and
  • third party liability (liability risk).

The requirement to arrange insurance for an infrastructure project (which is explored in the following section in more detail) will normally fall, to some extent, on each party involved. Despite the possible presence of an owner controlled insurance programme (OCIP) or a contractor controlled insurance programme (CCIP) encompassing all or some of the above types of cover, there will always be some residual risks that fall outside of the cover provided by these project-specific programmes.

For example, while an OCIP/CCIP may cover the risks present on site, there are many other insurance policies that may be required, such as terrorism, professional indemnity, motor liability, employer’s liability, directors’ and officers’ liability, contractor’s pollution liability, marine cargo/DSU, etc.

Full details of exactly what areas these types of insurance are intended to cover, the nature of what is insured, who is covered and for what period, as well as key exclusions, can be found in Classes of insurance.

Note that while the types of insurance cover detailed are particularly pertinent to infrastructure projects, they may also be applied to cover other types of construction projects such as energy facilities and power plants.

This section is maintained by David Cahill of Marsh JLT Speciality Construction.