Page 8 - issue 26

8 Cover Story

experienced Underwriting experts and of internationally accepted standard have explained this increase as general
Brokers with technical competencies contractual documents, has for a long escalation whilst others as a need to
and vast insurance experience work time recognised the need to apportion insure additional professional fees
closely with clients to conduct risk the risk of the contract site to a particular following a loss.
assessments and surveys to determine party, normally the contractor and make
the relevant covers required. The policy one party responsible for the purchase In the former case, where adequate
wordings are tailor-made for each of insurance. escalation is included there is
project instead of offering a generic duplication and unnecessary premium
product across all projects. BIC also has Insurance is also a product that is is payable up front. In the latter case it
a vibrant Claims division that ensures an extremely price sensitive and often little should be pointed out that the contract
efficient claims management process. cognisance is taken of the cover specifics sum insured presents the cost of the
Engineering covers include: in relation to insurance pricing quoted. permanent and temporary works as
Some policies may have seemingly set out in the contract conditions.
● Contractors All Risks (CAR) e.g. for attractive terms but the cover may not Professional fees are either covered by
infrastructure projects, such as roads, be comprehensive. If one considers a separate item in the policy or under
bridges, tunnels, airports, harbours and Contractors All Risks cover, some the additional costs and expenses item
hydroelectric power stations examples of the differences include: and not under this main contract sum
● Erection All Risks Insurance (EAR) insured. Any good policy will include
● Advanced Loss of Profits Insurance ● Some policies restrict cover to the site as a joint insured, if required by the
(ALOP) only and cover excludes transit, off-site contract conditions, the architect, land
● Contractors’ Plant and Equipment storage and manufacturers premises; surveyor, quantity surveyor, engineer
Insurance (CPE) ●Lack of additional clauses such as and any other advisor or consultant.
● Machinery Breakdown Insurance (MB) surrounding or employers property,
● Loss of Profits following Machinery servitude/road reserve indemnity and Contactors, Engineers and Principals are
Breakdown Insurance (MBLOP) beneficial occupation; not insurance specialists hence there
● Deterioration of Stock Insurance (DOS) ● Inadequate cover for additional costs is a need for closer cooperation with
● Electronic Equipment Insurance (EEI) and expenses such as professional fees, insurance specialists at various times
●Business Interruption following demolition and removal of property and during a contract’s life span.
Electronic Equipment Insurance (EEI BI) expediting measures;
● Civil Engineering Completed Risks ●Large deductibles or first amounts With respect to Liability Insurance,
Insurance (CECR) payable; Botswana is not a particularly litigious
● Seamless Project Insurance ●In respect of road and reticulation nation compared with other parts of
contracts, restrictions to the length of the world but liability claims are on
When asked on obsoleting of insurance unsealed road and open trenches that the increase both in number and in
packages related to the engineering are covered. value. Minimum liability requirements
sector, CEO of BIC Mr Newton Jazire including that of professional indemnity
stated that BIC will continuously review All these factors coupled with large are considered to be extremely low and
its product lines in relation to the needs deductibles or first amounts payable have increased little over the last 44
of the Engineering Industry. Rather than can reduce cover to near nothing in case years. This is not withstanding the fact
remove covers, BIC looks at ways to of a big loss. that the cost of projects have escalated
make them more relevant to the market dramatically over this period.
as to ensure that all the risks faced by Many Contractors All Risks covers
Engineers are suitably mitigated through will automatically provide a provision Professional indemnity cover is insured
quality insurance solutions. for escalation in contract price and on an annual or policy period aggregate
some even post loss escalation and basis. So potentially, an organisation
Insurance is unfortunately a subject that devaluation of anything between 10 and could exhaust their insurance cover
is highly misunderstood in Botswana 30 percent. The policy is then adjusted limit following just one incident and
and in Africa in general. This relates not at expiry on the final contract value. then leave themselves exposed to any
only to the need for insurance but also Notwithstanding this, many contracts future misfortune which results in a
the general principles of insurance such prepared by engineers and government claim against them. Little heed of this
as “Indemnity” and “Insurable interest.” require the contract sum insured under fact appears to be taken by the industry
The engineering and construction the policy to be increased, normally on the basis that “it will never happen
industry however, through a variety by 10 or 15 percent. Some engineers to me”!

Issue 26 Feb-Mar 2020 www.engineermagazine.co.bw
Issue 26 Feb-Mar 2020 www.engineermagazine.co.bw