Country: Global / Non-Specific
Keywords: Risk, Legal issues, Build-Operate-Transfer
Insurance - Explanatory Note bytes
Insurance is an area of project finance that is often left to the end of negotiations, with little attention given to it. Availability of insurance, levels of cover and deductibles will, however, have an impact on the risks being taken by the authority, the operator/ project company and the lenders and so should be central to negotiations.
Insurance is not always the best solution for dealing with every risk that may arise. It may also not be possible or economically feasible to obtain insurance for certain risks. While some generalizations can be made about the insurances necessary for projects, each project will require specific insurance coverage, based on the risks inherent to a particular project.
Often in the construction phase of a BOT project the insurances are obtained by the contractor, who is not that interested in the longer term implications of the insurance cover. It is important for the project company, with longer term interests, to co-ordinate this task so as to be sure that the insurances will suffice for the longer term.
This note is intended to be a general high-level guide to insurance issues. For more detail an insurance specialist should be consulted.
This document has been prepared for the purposes of the PPP in Legal Resource Center for contracts, laws and regulations (PPPLRC). It is a checklist for general guidance purposes only and should not be used as a substitute for specific legal advice for a project.
Image by Pixabay
Updated: March 8, 2022