MANAGING OPERATIONAL RISKS OF A MEGAPROJECT IN MONGOLIA: INSURANCE ASPECTS

Managing Risks of a Megaproject in Mongolia:

Insurance Aspect

Dorjpalam KhurelbaatarOyu Tolgoi LLC

Бүх эрх хуулиар хамгаалагдсан © 2016, “Oюу толгой” ХХКCopyright © 2016 Oyu Tolgoi LLC, All rights reserved

Managing Risks of a Megaproject in Mongolia: Insurance Aspect

7th Annual Risk Forum of Mongolia 9 November 2016Dorjpalam Khurelbaatar Oyu Tolgoi LLC


Outline

• Construction project insurance• Parties under project insurance• Project insurance program• Contractors’ all risk insurance• Third party liability• Professional Indemnity• Marine Cargo• Things to consider when placing the coverage


Construction project insurance

Contractors all risk Erection all riskDelay and start up

Third party liabilityEmployers liability

Motor liability

Professional IndemnityMarine Cargo

Plant and Equipment

Project Insurance


Parties under the project insurance

Project OwnerContractors

Sub-contractors

Architects Engineers Designers

Bankers Financiers


Project insurance program

Project Owner Contractor / subcontractor

Contractors all risk Erection all risk Delay and start up Professional Indemnity Third party liability Employers liability Motor liability Marine Cargo Contractor Plant and Equipment


Contractors’ all risk

Coverage: it is designed to provide cover for any damage occurs during construction process and covers following:-

– Materials in storage in project site– Contract works during the construction period– Maintenance and defective design– Free issue materials where these are included in the declared values

Insureds: Project owners, EPCM, subcontractors, architects, engineers, designers and suppliers some cases and financiers as required Limit of liability: Insurable value of the project Deductible: per agreement by insurer and insuredSpecial Exclusions: in most cases defect in design and contractors plant and equipment are excludedSpecial Extensions: depending on the policy wording extension like expediting expense or fire fighting facility coverage can be added


Third party liability

Coverage: Both Owner and contractors are required have certain level of third party liability insurance. It provides a cover for liability arising out of death or personal injury to third parties or damage to property belonging to third parties during the course of the project. Insureds : Project owners, EPCM, subcontractors, architects, engineers, designers and suppliers some cases and financiers as required and vice versa for contractor’s insuranceLimit of liability: depend on the third party exposure of the projectSpecial Exclusions: employees and contractors employees’ bodily injury or property damage, motor liability, professional liability, property owned by insured etcSpecial Extensions: waiver of subrogation, cross liability clauses


Professional Indemnity

Coverage: mostly carried by the contractors responsible for design and covers against legal costs and claims for damages to third parties arising from an act, professional errors, omission or negligent acts Insureds: EPCM contractors, designers and architects with additional coverage to OwnerLimitation period: generally required to remain in place until any limitation period endsLimit of liability: depends on the extent and the complexity of design works


Marine Cargo

Coverage: It cover against risks of loss or damage of goods in transit or storage from point A to B by sea, air (including courier) and land. Insureds : Project owners, EPCM, subcontractors, suppliers in some cases and logistic providers, financiers as requiredLimit of liability: Any one vessel, aircraft, postal pending per conveyance or one loss any one location Territory of coverage: worldwide coverage depending on the procurement of goodsTypical exclusions: ordinary leakage or loss in volume or ordinary wear and tear, insufficient or unsuitable packaging


Things to consider when placing the coverage

• Clear scope of the project and feasibility study• Project site visit from insurer or assessment of project risk• Insureds to be covered under the policy• Period of policy is based on the project duration – most policies have extended

maintenance period• Territory of coverage• Sum insured: determine the limit of liability (insurable value) with sub-limits • Deductible• Premium: deposit premium with installments and adjustable at end of the project

execution• Local regulations• Special exclusion and extensions• Waiver of subrogation or cross liability clause• Reputable loss adjustor or agreed claims protocol


Thank you

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MANAGING OPERATIONAL RISKS OF A MEGAPROJECT IN MONGOLIA: INSURANCE ASPECTS