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Professional indemnity insurance or Errors & Omissions insurance
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CONSTRUCTION & OIL TERMINALLING
RISK EXPOSURES AND RISK TRANSFER SOLUTIONS
2
• IOT’s Business Matrix
• IOT’s Insurance Program
•Risk Exposures
•Claim Scenario
•Risk Transfer Matrix
•PI Cover
•Way Forward
Agenda
3
Some Of Our Clients We Are Representing
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• IOT Infrastructure & Energy Services Limited (IOT) a technical and logistics solutions provider with domain expertise in
• Engineering Procurement & Construction (EPC),
• Terminalling,
• Upstream Services,
• Renewable Energy.
• Internationally benchmarked standards across all business models
• Successful handling of crude oil, petroleum products and petrochemicals as a storage provider
• Some major achievements across Pan India like Mumbai, Chennai, Goa in the following fields:
• Independent terminals,
• Storage provider, Refinery Tankfarm,
• Common User Terminals
• Operations & Maintenance
• 18 terminals with a capacity of 2.9 million KL
IOT Business Matrix
5
IOT Business Matrix Contd…
• IOT’s EPC vertical, an integrated engineering, procurement and construction service provider to the Oil & Gas, Power and Infrastructure sectors
• Areas of expertise:
• Service Provider from Concept to Commissioning
• Full in-house EPC Capabilities
• Proven Track Record in the Power Sector
• Synergies with Terminalling Business
• Global experienec in completing and commissioning EPC projects
• Employ over 2,000 people and have a business presence in over 11 countries.
Variety of operating models
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• CAR/EAR/ policy directly as a main contractor
• CAR/EAR Covered under main contract policy
when working as a sub-contractor
• Covered also for Marine risks
• Property coverage SFSP/IAR for operational
assets
• Terrorism/Political risks/ Credit risks not covered
• Covers need to be clarified on these Liability
products
• D&O
• Public liability/CGL
• PI
Our Understanding Of IOT Insurance Programs
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• Involves in significant investment
• Long implementation period
• High exposures to potential losses from perils such as
• Design flaws
• Act of God Perils (Earthquake, Flood etc)
• Accidents
• Errors of commission/omission
• These losses could adversely affect the viability
• Time delays and cost overruns (escalation)
• Wrong project estimations
• Coordinating with multitude of contractors
• Comprehensive insurance cover is the necessity for
addressing the requirement of all the stake holders including
lenders.
Risk Exposures In Infrastructure Projects
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• Case1: Lower tier sub-contractor agreement/sub-contractor management .
• A main contractor engaging in a sub-contractor on a package basis would be responded for the actions of the sub-contractors
• Case 2: Performance specification/non-adherence/delays in execution
• Over & above the LD which may be triggered due to delay, the EPC contractor may be sued for the dereliction of duty
• Case 3: Defective design
• Contractors PI would be triggered in case of defective design / workmanship resulting in latent fault manifesting into a claim
• Case 4: Inadequate supervision during construction
• Professional negligence for lack of supervision for e.g in a civil contract design drawings provided for bracing at a particular level was aimed at sectional drawings
Claims Scenarios
9
Risk Transfer Framework
10
Professional acts, errors or omissions
Mitigation costs
Sub-contractor liabilities
Defence costs
Loss of documents
What Does PI Cover?
Covered Contractor Activities
Feasibility studies Detailed designs
Geotechnical studies
Surveying (Quantity and
Land)
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Extensions
• Continuous cover
• Claims preparation costs
• Libel, slander and defamation
• Court attendance costs
• Extended notification period
• Intellectual property
• Inquiries
• Joint venture
• Merger / takeover / sale / winding-up of
insured – run-off coverage
• Newly created / acquired subsidiary
company
• Past subsidiary company
• Public relations expenses
13
Some Exclusions
• Aggravated, Punitive, Exemplary damages, Fines
or Penalties
• Employer’s liability
• Prior claims and circumstances
Vulnerabilities :Types of Damages
0% 10% 20% 30% 40% 50% 60%
Bodily Injury -Construction
Bodily Injury -Other
Property Damage
Economic Loss
% of Claims Dollars
% of Claims Count
Vulnerabilities :Sources of Claims
0.0% 10.0% 20.0% 30.0% 40.0% 50.0%
Architect
Civil
Structural
Mechanical
Electrical
Other Claim Dollars
Claim Count
Fees
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• Understanding IOT’s contractual risk sharing arrangement
• Understanding current insurance program
• Operational assets
• CGL/Public liability/D&O
• Terrorism/Political risk
• Customer credit
• Finalize the risk transfer mechanism
• Determination of Limit of Liability
• In-principle decision to proceed
• Collating of underwriting information
• Detailed discussion on policy structure
• Approach various Insurance and Reinsurance markets
Way Forward
17
Thank you