Tailoring Contractors All Risks insurance to the risk

Virtually no two construction contracts are the same. Each carries its own set of risks that can be transferred to an Insurer by means of a Contractors All Risks (CAR) insurance policy. Consequently, no two insurance policies should necessarily be identical when tailored to the specific risk at hand.

The wording is paramount

The underwriter’s policy wording is paramount and the foundation on which the policy is designed and built to address the contractor’s particular exposure. Insurers have all the ‘tools’ in the form of extensions, warranties, beneficial clauses and exceptions to construct and create a policy that meets the contractor’s requirements.

Some clauses and extensions are standard and may apply automatically, subject to pre-agreed limits and sub-limits. However, it is important to note that the completed policy wording must be aligned and designed to cater for and accommodate the risk(s). It is therefore vitally important that all parties acquaint themselves with the contractor’s contractual obligations, including the insurance requirements, as well as any other exposures that may arise from the contract and on site.

Understanding the risk beyond the contract

To meet these requirements, a tailor-made Contractors All Risks (CAR) insurance policy can be structured to safeguard the contractor’s contractual obligations and address the particular exposures associated with the project.

The policy can be extended to include Construction Industry Public Liability (CIPL) Insurance but determining an appropriate and adequate limit of indemnity requires careful consideration of the potential exposure. The limit of indemnity can never simply be assumed to be sufficient.

Further to the above, all parties must also consider associated liability exposures, which can sometimes be very onerous. These may include risks such as support risks and/or spread of fire but not limited thereto.

All parties should therefore be familiar with the clauses, limits, conditions and extensions available to tailor the policy to the risk. Some extensions may be subject to an additional premium and/or an additional deductible. The contractor, their sub-contractors and the employer or principal need to be aware of the extent of the cover provided for under the completed policy wording.

Sasria  (RSA and Namibia only)

A further potential risk is that of political or non-political riots, strikes, or civil commotion. Although these events can occur internally, the risk  is usually associated with events activated externally (outside of the contract site).

Cover for this risk/exposure is available from Sasria (South African Special Risks Insurance Association), a state-owned entity underwriting this class of business. Although it is an optional cover it is a totally separate Coupon policy. Sasria cover runs concurrently with the underlying (one off or annual) Contractors All Risk (CAR) insurance policy and is only available and applicable in the Republic of South Africa and Namibia (NASRIA).

The value of specialist underwriting

With the correct combination of policy wording, extensions, limits and conditions, a Contractors All Risks (CAR) insurance policy can be structured to respond to the particular insurance requirements of a construction contract.

Consort and its well-qualified staff are equipped to assist the Broker in ensuring that the contractor or principal (owner) obtains the contract insurance best suited to the contract, or to multiple contracts in the case of an annual insurance arrangement, at equitable terms, conditions and premiums.

https://consort.co.za/engineering-insurance-risks-understanding-policy-limits-sub-limits-and-extensions/

Consort Technical Underwriting Managers