Deals with provisions of Erection All Risk Insurance (EAR), Storage Cum Erection Insurance and Contractor's All Risk Insurance (CAR).

1. Project Insurance
Dr. Sarbesh Mishra
Month 00 2006

2. PROJECT INSURANCE
FABRICATOR
- MARINE &
STORAGE CUM
INTERMEDIATE
- ERECTION
STORAGE
LOCAL
SUPPLIER
SITE
FOREIGN
SUPPLIER
TRANSPORT
MARINE (IMPORTS)
MARINE (LOCAL)
MARINE LOP
CIVIL CONST.
STORAGE
ERECTION
TESTING
COMMN.
PORT
INTERMEDIATE
OFFSITE
STORAGE
ADDITIONAL
TRANSIT
CONSTRUCTION
MCE
EAR (SCE)
CAR
TPL
CPM
ALOP
OPERATION
FIRE
FLOP
OR
MB
BOILER
MLOP
EEI
IAR

3. ERECTION ALL RISKS INSURANCE ( EAR )
STORAGE CUM ERECTION (SCE)
&
CONTRACTOR’S ALL RISKS INSURANCE ( CAR )

4. WHO CAN TAKE THIS POLICY ?
This policy is designed to meet the requirements of those
involved in the erection of a project, either as the
principal or the contractor or sub--contractor.

5. WHAT DOES EAR POLICY COVER
An all risk policy that covers the risk associated with the installation of
an individual machine such as :
Turbine, Generator, Textile machinery etc.
or
erection of a plant or composite project such as:
Cement factory, Steel plant, Power plant etc.

6. WHAT DOES CAR POLICY COVER
The policy covers the risk associated with
Civil Engineering works :
•
Residential, Commercial Buildings, Airport
Terminal building
•
Factory, Sheds, hangers, warehouses
•
Roads, Flyovers, Subways,
•
Runways, aprons & Air Taxiways at Airports.
•
Bridges, Dams, Tunnels etc.

7. SCOPE OF COVER - EAR/CAR POLICY?
It covers all physical losses and damages arising from :
•Location Risks : Fire, Lightning, Theft, Burglary and House
breaking.
•Handling Risks : Impact from falling objects, collision, failures
of cranes or tackles etc.
• Testing & commissioning risks : Failures of safety devices,
leakage of electricity, insulation failures, short circuit, explosion (
Applicable to EAR Policy only ).
•Risks of Human element : Carelessness, negligence, faults in
erection, strike & riot, malicious damage, terrorism.
•Acts of God: Storm, tempest, hurricane, flood, inundation,
subsidence, landslide, rockslide and earthquake

8. WHAT IS THE DURATION OF THE
COVER?.......
•
EAR
from the moment
the material is
unloaded at the
site of the
project and
Continues
during storage,
erection and
completion of
testing or handing
over of the
project to the
principal
whichever is
earlier.
•
CAR
From the time of
commencement of
work or after the
unloading of the first
lot of materials at
site whichever is
earlier till the date
specified in the policy
schedule or the date
of handing over of
completed works to
the principal
whichever shall be
earlier

9. WHAT DOES THE POLICY NOT COVER?.......
•
Loss of materials not traceable to an event, e.g. discovery of
some shortages during inventory checking, tracing the cause of
which, cannot be attributed to an
Event.
•Normal wear and tears, gradual deterioration due to
atmospheric and other conditions, rust, scratching of painted
surfaces or breakages of glass.
•Loss due to faulty design, defective material or casting, bad
workmanship, other than faults in erection.
•Loss arising out of cost necessary for rectification or correction
of any error during erection, unless resulting in physical loss or
damage.

10. CONTD……..
•Damage to files, drawings accounts bills, currency, stamps,
deeds, evidence of debts notes, securities, cheques, packing
materials, such as cases, boxes or crates.
•Loss arising out of any damage or penalties due to policy
holder’s non fulfillment of terms of delivery or terms of
completion under the contract of construction or of any
obligation agreed there under or lack of performance,
including consequential loss of any king or description or for
any aesthetic defects or operational deficiencies
•Damage or loss arising from war/nuclear hazards
•Loss arising from total or partial cessation of work.

11. WHAT SUM DO YOU NEED TO INSURE ?
The completed project value including freight, customs duty
and erection costs is the basis on which the Sum Insured is
computed.

12. SUM INSURED SHOULD BE AGGREGATE
OF THE FOLLOWING
•Imported Machinery - Landed cost at site
•Indigenous Machinery - Landed cost at site
•Cost of Erection/construction
•Permanent Civil Engg. Works
•Half the escalation value if escalation is opted for.

13. THE FOLLOWING EXPENSES SHOULD NOT
BE INCLUDED IN SUM INSURED
•Engineering Fees
•Design charges
•Land value & site development cost
•License and other fees
•Project financing expenses
•Interest during construction

14. Basis of Indemnification






Partial Loss – Repairable Damage
Cost of repairing provided it is less than the property value
immediately before the damage. The cost of provisional
repairs shall be reimbursable provided such repairs
constitute a part the final repair and do not increase the
total repair expenses
Total Loss – Requiring Replacement
Insurers required to pay for actual value of the damaged
item immediately before the occurrence of the loss
Constructive Total Loss
When repair cost arising out of an insurable peril is more
than replacement cost, it is known as ‘Constructive total
loss’ and such claims are dealt in line with Total loss claims.

15. SPECIAL FEATURES OF YOUR POLICY
•Limited self survey facility and discount on premium are
offered for voluntary higher deductibles.
•Includes terrorism risk up to INR 6000m by payment of
additional premium
•Facility for quarterly premium depending upon your merit.
•By including visits by specialist and experts and supervision
charges in the cost of erection, policy can cover these costs as
well.

16. HOW TO EXTEND YOUR COVER
THROUGH OPTIONAL EXTENSIONS ?
•Maintenance cover
•Protection from inflation ( Escalation )
•Clearance of debris from the site
•Damage to own property at surrounding site
•Third party liability
•Additional custom duty
•Expediting cost following loss or damage from express
Freight
•Holiday and overtime rates and wages
•Loss due to changes in air freight rates
•Offsite storage/fabrication.
•Design defect cover
•Waiver of subrogation
•Valuable documents

17. Free Add-on Covers
Above Rs. 100 cr. SI










50 : 50 Clause
72 hours clause
Automatic reinstatement upto 10% of SI
Loss minimisation expenses
Debris removal upto Rs. 50 Lacs per occurrence
Professional fees
Waiver of contribution clause
Expediting cost incl. air freight and express freight upto 30% of
net claim amount
Additional custom duty upto Rs. 10 cr.
Amendment in fire fighting

18. Basic Rate Computation
EAR




Rate for 1+1
month for testing
Subsequent 10
months
Balance period
Additional Testing
CAR


Rate for first 3 months
Balance period

19. VOLUME DISCOUNT
Sum Insured
Discount %
Above 100 crores & upto 350 crores
10
Above 350 crores & upto 700 crores
15
Above 700 crores & upto 1500 crores
22.5

20. HIGHER EXCESS DISCOUNT
Higher Excess
2 times compulsory excess
5 times compulsory excess
10 times compulsory excess
20 times compulsory excess
30 times compulsory excess
40 times compulsory excess
50 times compulsory excess
100 times compulsory excess
More than 100 times compulsory excess
Discount
5%
10%
20%
30%
35%
40%
45%
50%
55%

21. Rates for Add-on Covers
Project SI < Rs. 100 cr.

Separate rates as per Tariff
provision

Applicable on Individual limit
selected



Project SI > Rs.
100 cr.
Separate rates as per
Tariff provision
depending on Limit
selected
Applicable on Project
Sum Insured

22. Thank you
Month 00 2006