Engineering Insurance-Meaning and Risk Associated with new Project

Introduction

Project and engineering insurance revolves around some industrial works like designing and creating{both interior and exterior design}, building, and construction which requires enough skills and technicality.

Every project manager controlling or managing any construction work is assumed to know that the failure of the project under his care and management will attract the repayment of all the costs incurred.

Also, in case of any delays or failure of the project, liquid funds will have to be made available to replace the costs incurred as well as repay the loans taken.

However, because of these uncertain perils, the demands for project insurance are increasing with major emphasis placed on infrastructure projects, besides other large projects by providing protection against the failure of any project.

Engineering insurance refers to the types of insurance that provide economic coverage to the risks relating to an ongoing industrial work such as construction project {buildings, covert bridge, and road construction contract}, interior and exterior designing, machine installation project, solar installation project, etc.

The basic risks associated with new projects

Those risks which may likely have a negative or positive impact on the construction or operation of a project can be grouped as follows.

i. Operational Risk: This risk explains the uncertainties and hazards a company faces while handling a particular project or contract in its attempts to do its day-to-day business activities within a given field.

It relates to poor performance that results in failure to generate reasonable cash to pay the lending financial institutions.

ii. General Risk: This risk revolves around vendors’ inability to utilize power generated.

iii. Commercial Risk: This has to do with the risk taken by the seller in the event of giving out his facility on credit without collateral demand. However, it relates to those problems during construction resulting in delays and escalation of costs.

iv. Political Risk: Political risks are risks associated with changes that occur within a country’s policies due to political change, business laws, or investment control and regulation.

v. Risk of Disparity: This risk arises when the items supply is not equal to the needed market, thereby resulting in the inability to produce the insured capacity.

Most importantly, risk management helps companies, individual or corporate bodies, and project managers to identify, analyze and finance risks that could arise at the cause of carrying out their project work.

Thereby making a proper provision to ensure good handling of the risk.

What is project insurance?

Basically, project insurance involves those insurance covers for any damages to project material whilst in transit, risk of damage on-site, while been erected or commissioned under an all risks project insurance policy.

However, Project policy means a contractual policy that the employer embraces to cover Contractors against every risk and public liability.

This cover helps to protect employers, contractors, sub-contractors, and suppliers.

Also, this policy has been prepared after bearing in mind the various risks associated with the erection of factory ranging from the shipment of the first consignment, the subsequent storage, civil construction, erection of plant and machinery, commissioning, and trials until the end of the trial period when commercial production commences.

All damages or injury to the third party is covered under this policy, that is to say, that project insurance policy takes cognizance of those events or happening that take place during the course of the project or within the project time frame.

Who needs an insurance project?

Generally, Both established private and public companies, {small and self-employed independent workers}, need to be protected from those risks associated with the general contractors.

Also, a beginner in a defined project needs the policy cover, this is to enable him to stand strong in the event of injury or damage which its occurrence is undefined.

professional consultants can be covered by a project policy for their activities while on site etc.

Basic project insurance cover:

insurance cover under project insurance policy comprises the following

1. Professional consultants can be covered by a project policy for their activities while on-site

2. Coverage for transit to take care of the interest during the transit from the various suppliers, warehouses to the site of erection.

3. Storage and erection coverage to take care of the interest during storage, erection, testing, and commissioning.

The transit risks covered include all risks plus war, strike, riot, and civil commotion for imports and strike, riot, and civil commotion for inland transit. While for erection the risks covered include; accident, fire, riot and strike, lightning, malicious damage storm, earthquake, etc.

Summary:

Every project manager controlling or managing any construction work is assumed to know that the failure of the project under his care and management will attract the repayment of all the costs incurred.

Because of this issue of repayment in the event of project failure, breakdown of industrial equipment, etc, many contractors have embraced insurance policy as a safeguard against the event of any form of risk.

Therefore, Engineering insurance refers to the types of insurance that provide economic coverage to the risks relating to an ongoing industrial work while

project insurance involves those insurance covers for any damages to project material whilst in transit, risk of damage on site.

We also pointed out that political risk, general risk, risk of disparity, and operational risk are some of the major risks associated with a new project.