Construction

The race is on in the UK for councils to implement 'waste to energy' schemes. This year is the first deadline for EU Landfill Directive targets aimed at reducing biodegradable municipal waste and the UK is way behind.

When bidding for projects the costs of insurance remain a risk in themselves.

Fixing a price for insurance 2-3 years before construction commences brings risks, as you don't want the cost of insurance eating away at your margin once the project is operational.

The 6 key ways to manage your risk on insurance cost for your Waste to Energy Project Finance Initiatives (PFI) are:

- Ensure you have a robust premium sharing agreement that reflects market changes within the market that you will be using.

- Review and identify all factors that could affect the costs.

- Nail down your risk management and address key areas of concern to Insurers.

- Have an open dialogue on insurance with the Authority and agree at what point insurance costs should be fixed.

- Consider whether savings can be made an operational premiums by including it in a PFI portfolio with a range of other PFI projects.

- Factor in the insurance market cycle by having a good understanding of its current stage and knowledge of the potential variance.

The more information provided to the broker and the more experience the broker has within the sector, the better they will be able to understand the project and get it priced effectively.

This is just one of the issues explored in this month's PFI Bulletin: Waste to Energy, PFI in 2010. Here, I review the main risk management and insurance challenges facing those involved in PFI Waste to Energy projects. Please click here to read more.