PROJECT INSURANCES
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PROJECT INSURANCES
• Why We need to Insure
a Project.
• Insurances are required
for every single
construction project, as
all Projects having
unlimited risks
occurring loss or
Damage from the
commencement to the
completion.
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PROJECT INSURANCES
• Why We need to Insure a
Project.
• Neither Owner nor
Contractor couldn’t bear
the risk of Damages as
generally the damages
are huge.
• Hence Owners &
Contractors intend to
transfer the risk of Project
to the Insurance
Company by securing a
APPLICABLE insurance
Policy
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PROJECT INSURANCES
• Why We need to Insure
a Project.
• Moreover, Insuring a
Project is a Mandatory
Contractual
Requirement, by the
Client to minimize their
risk-As stated in Related
Project Contract
Conditions
• MPW General Condition
of Contracts- Article 21Insurance of the works• FIDIC- Red Book for
Conditions of Contracts
for Construction 1999Article # 18 -Insurance
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PROJECT INSURANCES
• What type of Insurance to be Selected.
• In General according to the Type of Procurement
Method the required Type of Insurances are
varying. Mostly the specified condition of Contract
for the Project, shall specify the type of Required
Insurance.
• Kuwait Civil Works has to be followed the MPW
Condition of Contract Requirements.
• Kuwait KOC Contracts has to be followed the KOC
General Conditions of Contracts
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PROJECT INSURANCES
• What type of Insurance to be Selected.
• FIDIC –Red Book to follow for the Construction
Works
• FIDIC-Yellow book or Gold Book to follow for
Design and Built Projects
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PROJECT INSURANCES
• Mandatory Insurances for A CONSTRUCTION
PROJECT
• CAR/EAR- Contractor's all risk Policy/ Erection All
Risk Policy
• TPL-Third Party Liability Insurance
• WC-Workmen Compensation Insurance
• PI-Professional Indemnity Insurance
• CPEM-Contractors Plant Equipment and Machinery
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PROJECT INSURANCES
• COVERAGE OF CAR/EAR
• It provides coverage for damage to the project
under construction and for materials and
equipment that are destined for incorporation into
the project, including items in storage and in
transit to the site. Part II provides liability
insurance for third-party bodily injury (BI) and
property damage (PD) arising out of the
construction operations.
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PROJECT INSURANCES
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PROJECT INSURANCES
• CAR- Contractor's all risk Policy
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PROJECT INSURANCES
• EAR- Erection All Risk Policy
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PROJECT INSURANCES
• What CAR/EAR is not covered.
• Particularly the material or equipment inside the
Project Premises and inland transit only covered.
But the material during the transit out side of the
Country is not covered by the CAR/EAR. However
these goods are covered during the outland
transit by a different insurance coverage in
according to method of transit method complying
with the International Commercial Terms
(INTERCOM)
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PROJECT INSURANCES
• What CAR/EAR is not covered.
• Failures due to negligence design is not covered.
• Defective Workmanship and Materials not covered
under General CAR Policy, but this could be
covered provisionally as per conditions LEG-2& 3
• Loss or Damages to the Contract Works during the
Defect Liability Period- If you have Extended
Defect Liability Clause, it will be covered only
defects arose from your construction failures only.
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PROJECT INSURANCES
• What CAR/EAR is not covered.
• Some Insurance Policies are not covered the Temporary
facilities, in that case Contractor has to include the
amount of Temporary facilities separately to include in the
Policy.
• Some policies are not covered removing of debris. This is a
very important part and most of are not aware of this. If
Policy not covered the removing of debris, Contractor has
to bear the cost of removing debris occurred to a incident
and insurance shall pay only for new construction works
only. As example; if offices damaged by fire, fired office to
be removed and new to be re constructed. If removing of
debris are not covered then Contractor can claim for the
new Construction.
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PROJECT INSURANCES
• What are the Measures can be taken to extend
the Insurance coverage ( to include the excluded
insurance Clauses )
• In General Project Management are responsible to
included the required insurance Clauses as per
the Project requirement, with an additional
Premium, to avoid any risk. Ex. This facility is
available with any insurance coverage and is called
as amendments/endorsements.
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PROJECT INSURANCES
• What are the Measures can be taken to extend
the cover ( to include the excluded insurance
Clauses )
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
• Major insurance Clauses in the Policy and Clauses to
be additionally included with regards to special tasks
as ex. If micro-tunneling is in the Project, this to be
specially included as a separate clause.
• What are limitation for each incident. As generally it
covers the total Project amount , but insurer
particularly limit the liability for each incident as per
the type of incident. Hence required limitations to be
considered. Ex. Clause; Removing of Debris KD 250,
000/- in aggregate.
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
• Insurance Deductibles- What is this deductibles.
Normally every insurer is trying to minimize the
insurance claims. Accordingly they set some
conditions or limits at each foreseeable risks to
control the number of Claims. Deductible is such a
condition to limit the claims. If you review any
insurance policy you can read the limit of
deductible for each stated risk. As example.
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
• This means that, if any material damaged occurred
by act of God, Fire, Water, etc. KD 5000 will
deducted from the total payable Claim for each
and every liability. If further explains, Contractor
has to bear the cost of KD 5000 with regards to
this claims.
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
• Total Amount to be insured .
Prior to secure a Insurance policy we have to
identify the total amount to be insured.
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
In General Project Value only to be insured,
considering escalation (if applicable). Other amounts
such as temporary offices, Existing property etc. are
insurance extensions.
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
• The premium of the Insurance Policy.
The cost of the Insurance Policy is in Generally 0.1% of total
Insured Amount, but can be increased according the level of
the Project Risks. (We should aware of that insurer quoted
their price by indicating the percentage for each million i.e.
as 1.0%o). You have to aware that while the insurance
deductible are low, the premium of insurance is getting high.
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
• In General Insurance shall issue to Project Period
and for 2 years Maintenance Period. Hence we
have to secure the Insurance with extending
coverage for 5 years as here in Kuwait MPW
contracts having 5 years maintenance period
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PROJECT INSURANCES
• IMPORTANT POINTS TO BE CONSIDERED WHILE
SECURING CAR/EAR Policy.
• To whose name the insurance to be issued.
Normally insurance shall be in the name of Client,
Consultant, Contractor and Subcontractors name.
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PROJECT INSURANCES
• TPL- Third Party Liability Insurance
• This insurance issue under the CAR policy as a part
ll. The required limitation of TPL is mentioning in
the Particular Conditions. This insurance cover the
damages of the Third Party, either body injury or
property damage. Third party means parties who
are not included in the Main Contract, such as
Client, Consultant, Contractor , Subs, etc.
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PROJECT INSURANCES
• WC- Workman Compensation Insurance
• This insurance issue to coverer the Workmanship
and staff of the Project . This insurance also
mandatory requirement as per the Contract
Conditions.
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PROJECT INSURANCES
• PI- Professional Indemnity Insurance
• This insurance is specially secured for the Design
Build Projects. The damages occurred due to
professional negligence is covered by this policy.
Generally this insurance can be obtained by the
design firms, consulting firms as such professional
services only. In design build projects , the design
failures risk will cover only this policy.
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PROJECT INSURANCES
• HOPE ALL YOU GOT FRAME IDEA OF PROJECT
INSURANCES
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