Almost every week there is news of a commitment to finance construction projects around the world, either at a governmental level or through private investment.

For most large multi-year projects, the necessary materials are not available domestically and have to be shipped in from around the world in a complex logistical operation, with each component arriving at the project site just in time – not too early and not too late.   For relatively non-complex builds such as jetties, wharves, bridges and other civil engineering projects that do not require large-scale machinery there are few critical components that, if lost, would create substantial delays to the completion and, ultimately, revenue generation.

But, for power plants, dams, new marine terminals and the like,  the situation is rather different.  Critical items (defined as specific to the project, technical, unique or which cannot be replaced quickly – speed is the issue here) hold the key to the project being delivered on time, failing which the loss of revenue is felt immediately.

Where there is a large scale construction project, there is a cargo insurance for the inward materials, machinery and critical items – what’s known as Project Cargo Insurance.  It’s broadly the same as a standard cargo insurance policy,  but it will be in place for the entirety of the project construction, sometimes two or three years.  In addition, there are risk management procedures to help manage the Client’s exposure to loss or damage to a critical item as well as special clauses to respond to the loss.

In addition to the physical loss exposure, revenue generating projects should be looking to Delay in Start Up or Advanced Loss of Profits Insurance to cover their losses in the event of a delay through loss or damage to cargo being transported to the site.  This is, in effect, Business Interruption before the business is operating – and works alongside the Project Cargo Insurance.  If the cargo insurer is also exposed to the DSU claim, they have a  clear interest in replacing lost or damaged items (specifically critical items) quickly and expensively if necessary, if that cost is lower than the DSU claim that will arise.

Project Cargo is insured by a specialist sector within the marine cargo market and is a great deal more risk management focused, and recently, a lot more competitive.  Contact us to find out how you can benefit from the expertise available as part of the Project Cargo package at an early stage of a Construction Project.

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