Project insurance
It is good to start thinking about project insurance already in the project preparation phase before the contracts are signed, when it is clear which contract model you want to apply, who or who will buy the insurances and which insurances are required in the contracts. Already at this stage, it is worth including an insurance professional in the planning, so that things go right from the start and that the right insurances are in place at the various stages of the project.
Standard solutions for typical projects
The more typical your project is, the more likely it is to insure it with standard insurance solutions. In a Finnish investment project, contracts can often be tendered according to general contract terms. Such are e.g. KSE in design work and YSE in construction
The task of the ordering party is to ensure that the insurance coverage is sufficient and as seamless as possible. We recommend paying particular attention to
- contractual risks
- the contract template referred to in the contract
- the applicable legislation
- the competent court and its location,
- claims for damages
- the insurance amounts and contents of the liability insurance.
Without forgetting, of course, the Subscriber Liability Act, sufficient delay fines and so on, because there is a lot of variation in these. If there are technical difficulties in the project or if the project is significantly delayed, these aspects have great financial importance.
When do I need project insurance?
When the project is not typical, but there are specific issues related to the way the project is implemented or the client has special insurable risks, project insurance is needed.
It is worth considering hiring a professional to help build an insurance solution, especially if
- the project is large in terms of investment or contract amount
- the project consists of several different entities/orders or it is a challenging shared contract
- the customer has a special risk of delayed suspension
- the share of customer purchases is large or the main share of the project is an investment related to production/operations
- the implementation form of the project is, for example, alliance, PPP or life cycle
- the parties come from different market areas where insurance methods vary.
Security built for needs, and nothing superfluous
With the help of careful planning, all necessary extensions can be included in the project insurance, and on the other hand, everything unnecessary can be eliminated from the contents of the insurance.
Project insurance includes the following types of insurance:
- consultant's liability insurance (design risks)
- construction and installation work insurance or CAR/EAR (property risks)
- operational liability insurance or TPL (liability risks)
- transport insurance or Marine Cargo (transport risks)
- delay interruption insurance or DSU (delay risks)
The last four types of insurance can be obtained with the help of a separate project insurance product. In this case, project insurance becomes a clear entity that is easy to manage. Claims handling is also more straightforward.
Another option is to use a model consisting of individual policies. This option is also functional - if it is done carefully.
This is how we design project insurance
Project risk management
Insuring a project is always based on risk assessment, and therefore insuring a project should always start with a review of contracts and risks. It is good to note that not all risks can be financed with insurance. That's why it's good to prepare for risks by other means as well. For projects, risks can be divided into four categories: contract risks and design, construction and operation risks. It is also good to take into account the product liability of the equipment suppliers, which is significantly blurred if the equipment consists of a product package built from the products of several manufacturers.
Clarification of the project's insurance needs
We make sure that there is a good and comprehensive description of the project, which includes the essential things from the insurance company's point of view. In practice, what and how we are doing and where and on what schedule. After that, we check the effects of the legislation both in terms of the content of contracts and insurances, we define which insurances we will apply for and from where, and what kind of insurance conditions would be good to use when insuring the project.
Procurement of project insurance
We obtain as many comparable insurance offers as possible. Sometimes, however, the situation may be that it is possible to get insurance from only one insurance company. However, we always look for the best possible insurance solution and present it to you. Once the insurance choice has been made, we will take care of the insurance for you with the insurance company.
Administration of project insurance
Since projects rarely go from start to finish exactly according to the original plan, there is quite a lot of management work involved, which you can outsource to us if necessary. Insurance needs may change as the project progresses and insurances must be updated. In addition to this, management involves e.g. reporting to insurance companies, handling claims and tasks related to risk management. It is also important that all of these are taken care of in the right schedule.
Foreign projects require special expertise
In foreign projects, the range of contract models is considerably wider than domestic ones, and the content of the required insurances also varies a lot. That's why contract risk management and finding out the requirements set by local legislation are key in foreign projects.
The parties also often come from very different market areas, where insurance methods and products, legislation and operational practices vary significantly.
For these reasons, it is advisable to involve a professional in international insurance as early as possible in international projects. We make sure that the correct insurances complying with local legislation are in place at the different stages of the project and that issues related to local customer liability are taken into account.