Due to the technical nature of the sector and its long lead-in times, predicting accurate insurance costs for waste to energy bids continues to be a challenge. Louise Mercer, a Partner within JLT Specialty Limited's (JLT Specialty) PFI team highlights some of the risks that need to be considered and describes how many of the issues that would traditionally be insured under separate fragmented policies such as contract works, marine transit, operational insurances and environmental liability can now be purchased together in one policy developed by JLT Specialty.
Establishing the correct sum insured
Whilst it is relatively straightforward to set an appropriate material damage sum insured, establishing a loss of revenue/increase costs sum insured which covers Project Co's actual loss following an insured delay needs a full understanding of Project Co's responsibilities under the contract. If the facility is unavailable following, for example, a major fire Project Co will suffer a loss of revenue until the facility is reinstated and fully operational. Project Co may also lose revenue from third parties. Alternatively Project Co may retain the responsibility of accepting and processing the waste and may need to arrange transport to a neighbouring facility or land fill site. Project Co needs to establish whether the revenue would still be payable as the actual loss could be limited to additional costs of transportation and land fill charges (perhaps including LATS and other charges). Potentially under some contracts a Project Company could suffer loss of revenue and additional costs, both of which would then need to be insured.
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