In the field of international engineering, utilizing international engineering insurance has become a primary measure for contractors to control risks. As they venture into uncertain territories, international engineering contractors need to analyze risks based on the actual situation and effectively use international engineering insurance to enhance their risk resistance capabilities and mitigate the impact of uncertainties. Risk control involves avoiding, transferring, mitigating, and accepting risks.

Major Types of International Engineering Insurance

1. Construction All Risk Insurance (CAR)

Construction All Risk (CAR) insurance is a comprehensive property loss insurance that includes Construction All Risks Insurance and Erection All Risks Insurance. Construction All Risks Insurance covers civil engineering, reinforced concrete, construction tools, and equipment materials, protecting against losses caused by natural disasters, accidents, and other factors during construction. Erection All Risks Insurance covers losses of mechanical equipment and steel structures during installation.

In international engineering EPC (Engineering, Procurement, and Construction) projects, contractors are responsible for the entire project, including design, procurement, and construction, making it unnecessary to distinguish between Construction All Risks and Erection All Risks. Additionally, in international practice, contractor’s plant and machinery insurance and third-party liability insurance are often included as add-ons to CAR insurance.

2. Construction Plant and Equipment Insurance (CPE)

Construction Plant and Equipment Insurance, often referred to as CPE, insures large construction machinery used in international engineering projects. This includes equipment like tower cranes, earthmoving equipment, and concrete pumps, which are valuable and prone to damage. Contractors usually lease these machines from specialized equipment companies and are liable for damage under rental contracts. Vehicles such as cranes and excavators, which are not typically mandated by law to have insurance, are also covered under CPE insurance.

3. Third Party Liability Insurance (TPL)

Third Party Liability Insurance (TPL) covers personal injury, death, illness, or property damage to third parties (not the contractor or project owner) caused by the project within the construction site or nearby areas.

4. Employer Liability Insurance (ELI)

Employer Liability Insurance (ELI) protects contractors from financial compensation claims made by employees for economic losses due to accidents or occupational diseases during employment. This insurance covers compensation within the scope defined by the insurance contract.

ELI is different from workers’ compensation insurance. Workers’ compensation is mandatory social insurance in most countries, while ELI is a commercial insurance based on contractual agreements. Workers’ compensation protects the employee’s health or life, while ELI protects the employer’s liability.

5. Cargo Insurance

International engineering projects often involve sourcing equipment and materials from multiple countries, necessitating extensive cross-border transport. Cargo Insurance covers the loss or damage of goods during transit due to external factors, whether by sea, land, or air. The type and scope of cargo insurance depend on the procurement pricing method chosen, such as FOB (Free on Board), CFR (Cost and Freight), or CIF (Cost, Insurance, and Freight).

Market Analysis of International Engineering Insurance

1. Non-Commercial Insurance Market

Non-commercial risks, often political in nature, are complex and difficult to quantify, limiting the insurance market’s capacity to cover them.

• International Market: MIGA offers significant coverage with broad conditions but involves complex procedures and high upfront costs. Political risk insurance through Lloyd's of London and other markets can be costly. AIG and similar markets provide limited standalone coverage, often acting as reinsurers.
• Chinese Market: Sinosure is the most direct and accessible insurance provider.

2. Commercial Insurance Market

The commercial insurance market is more developed, offering a wide variety of products and options.

• International Market: Major players include European insurers like Allianz and Munich Re, the London insurance market including Lloyd’s, and North American insurers such as AIG.

Utilizing the appropriate types of insurance in international engineering projects can significantly enhance risk management and financial stability. Understanding the nuances of each insurance type and the market options available is crucial for contractors operating on a global scale.

(Images from the internet)