US Construction Risks

1. Deal in FACTS not PERCEPTIONS - on many occasions we have marketed a risk to an insurer who was hesitant to commit because of perceptions they had regarding prototype issues - once we addressed these issues with facts, the insurers usually came on board.

2. Get the FACTS - somebody, somewhere on the Project Team has all the information regarding any "unproven" issues.  Clients do not typically commit up to US$ billions to a project that they are not pretty certain is going to work well!  Don't be afraid to hunt down the facts, explaining to the stakeholders that such information will ultimately get them the cover they want at an affordable price.

3. Get the MANUFACTURER involved - With the client's permission and co-operation, consider getting the manufacturers involved in convincing the insurers that the equipment in question should not give them cause for concern.  Manufacturers have a lot to gain by showing potential customers that their products are acceptable risks to Insurers, and a lot to lose if they can't.  Manufacturers will sometimes be extremely co-operative in assisting you with the "technical broke" to Insurers either by providing FACTS or even accompanying you to broking meetings with insurers.  Also, manufacturers may be able to direct you to insurers who they know are accepting of the technology in question.

4. Be REALISTIC - if faced with an undeniable prototype project, have realistic expectations - shooting for the stars, hoping to hit the ceiling is not necessarily a smart strategy here, because there are a surprisingly small number of credible lead insurers who are prepared to get into in-depth discussions regarding prototype issues (especially on the major / mega projects), and if your initial approach is too aggressive, it may turn them off completely, leaving you no-where to go! 

5. Be CREATIVE - following on from the point above, if you are dealing with undeniably prototype equipment, there may be other ways to address "risk of loss" issues with your client:  examples include obtaining generous warranties / new technology indemnities from the manufacturer (who will be keen to be seen to be selling such equipment), but note that such protection would not cover the resultant Delay in Start up Risk.

Tony Rastall is a leading US engineering construction expert and has acted as either lenders adviser or project broker to numerous projects with values up to US$20bn. He has lectured widely on international insurance and related matters including addressing the World Bank in Washington DC on major project risk issues. Tony also has completed a Gas Turbine design course with the American Society of Mechanical Engineers.