Project Risk Insurance Considerations Sahreena Mohammed GM Aon

Project Risk & Insurance Considerations Sahreena Mohammed, GM Aon (Fiji) Pte Ltd – June 2019

Contents 1. Top Global Industry Risk 2. Insurance vs Indemnity 3. Contractual Responsibilities 4. Managing Project Risk 5. Transfer to Insurance 6. Insurance Lookouts

Top Industry Risk § Global insurance losses § Markets for Fiji projects

Top Industry Risk § Global construction industry top 10 risk

Insurance vs Indemnity § Indemnity – the extent to which the employer/principal or contractor is required to make good loss/damage to each other or third parties § Limitation of Liability - max liability of parties to each other arising under contract § Insurance – transfer of some of the contract risk in the form of an insurance policy for specified loss/damage RISK INSURANCE Risks Passed under contract Insured Risk

Contract Responsibilities § Fiji contract forms: § Australian AS 4000: 1997 § NZS 3910 § FIDIC & Short form version

How to Manage Project Risk § Consider Project Specific Risk § Contract Responsibilities § Transfer to Insurance § Insert pic

Risk Register Template 8

Transfer to Insurance § Insert pic

Construction loss - Things can go wrong

Design Issues - Things can go wrong!! Design issues - Things don’t come together!!

Liability issues – Things can go wrong

Insurance Lookouts – Contract Works Covers physical loss or damage to project works. § Existing Structure § Storage / Transit limit § Defects exclusions § Extended Maintenance § Need for advance loss of profits / delay in start up to project

Insurance Lookouts – Contract Works Covers physical loss or damage to project works. § Limits for additional cost § Allowance for increase in cost to project § Allowance for increase to unbuilt part of project § Cover needs be in joint names

Insurance Lookouts – Public Liability Covers third party personal injury and property damage arising from the project works. § Consider resultant effects of methodology § Proximity to third party property § Vibration damage § Removal of support § Preferable in joint names with cross liability

Insurance Lookouts – Public Liability Advisable: Survey of third party property in close vicinity pre and post works Effective management of dewatering risk Early assessment of potential damage from vibration

Insurance Lookouts – Professional Indemnity policy covers a contractor / consultants for their legal liability arising from an act, error or omission in their professional services. What limits to consider § Cost of professional services and project value § What financial loss could be suffered § What would the rectification potentially cost (how costly to fix) § Could third parties be affected Be sure to collect a copy of their PI insurance certificate off the contractor / consultant

Insurance Lookouts Construction Plant Covers damage to plant & machinery during construction. § Consider basis of cover § Generally a peace of mind that contractor’s balance sheet will not be constrain and financial security to replace plant to continue works. § Availability of alterative plant § Advisable to include within construction policy

Insurance Lookouts Marine Insurance Covers damage to materials in transit. § Consider which party is best placed to cover risk § Cover from warehouse to project site § Generally policies contain a 15 -30 days condition from delivery to inspect goods § Consider delay in start up risk

Conclusion Prepare early Understand project risk Understand insurance requirements Design the right response 24

Thank you. www. aon. com/fj © Copyright Aon (Fiji) Pte Limited 2019. All rights reserved. No part of this report may be reproduced, stored in a retrieval system, or transmitted in any way or by any means, including photocopying or recording, without the written permission of the copyright holder, application for which should be addressed to the copyright holder. 25