FAQ (Frequently Ask Questions) Engineering Insurance policies in principle provide “All Risk” type covers. This means that almost any sudden and unforeseen physical loss or damage occurring during the period of insurance to the property insured is indemnifiable (payable by insurers). In essence, every Hazard is covered which is not specifically excluded. Therefore: Caveat emptor (buyer beware): be careful and let us help you understand the exclusions! that is, what are the risks insurers are not insuring/Covering you against? You also need to be aware of the various ‘Warranties’, ‘Memos’, ‘Conditions’, etc contained in the policy wording issued to you. Why? So that you do not unwittingly breach (be in fault with) these ‘Conditions’, and, So that you understand the Scope and Limitations of your policy cover. Who Requires Engineering Type Insurance Cover? Financiers, Developers, Owners, Principals, Employers, Purchasers, Main Contractors, Sub-Contractors, Supplier-Installers, etc. Who are involved in: 1) The construction or erection of all types of civil, electrical, mechanical engineering projects, 2) The managing and on-going operation of these types of industrial developments/projects, 3) The use/operating or leasing (hiring-out) of Contractor’s Plant and Machinery. Why would they need such Insurance Cover? 1) For accidental (fortuitous), sudden and unforeseen loss or damage to the Works/Projects under construction. Example: Brought about by a fire, theft, storm/hail, collapse, etc. 2) For accidental (fortuitous), sudden and unforeseen loss or damage to the completed and handed-over Works/Projects. Example: Brought about by mechanical and/or electrical breakdown or derangement, etc. 3) The resultant Loss of Gross Profit, or Loss of Rent, or Loss of Revenue, and/or Increased Cost of Working, etc. How can These Entities (‘Insured/s’) be offered the necessary Insurance Protection/Cover? That is, on what basis? 1) This can be arranged under a specified Project (Project Works) insurance policy which could either cover the whole of the Project (that is, a Project made up of many Contracts or Sub-packages). It therefore covers all the related Contracts and the Contractors involved therein, [Based on Project Value], or 2) A specified Contract for an individual Contractor’s/Sub-contractor’s interests in a Project or in a single, stand-alone Contract, [Based on Contract Value], or 3) An annual ‘Works’ policy embracing all of the Contractor’s work carried out over the unfolding year, [Based on Annual Revenue/Turnover and usually with a Maximum Any One Contract Limit specified. ??] If we regard ourselves as Business Enterprises requiring these Engineering Insurances, why should we utilise your Services? Our Team Leader is well-known within the specialist engineering insurance sector of the Sub-Saharan African market. Our Practical Engineering experience, our Insurance Underwriting knowledge, our Claims Handling expertise and our professional Insurance Industry Relationships allow us to negotiate and secure: • Optimal Cover for your Project/Contract/Operational Plant at Risk, • A Value Insurance Price/Premium, Furthermore, we provide: • Quality and meaningful Related Project Risk advice, • Guidance and hands-on Claims Handling facilitation – that is, in the event of Insurable loss or damage to the ‘works’. How would you be paid for these Services that you would be providing to Me as the Insured? We are paid per the standards (globally) adopted in the Insurance Sector. Generally, we would secure a maximum 20% Broker Commission payment from the Insurer. In other words if your Insurance premium is deemed to be say, R10,000.00 to the Insurance Company, this Insurer would pay us (after you have made the R10,000 Payment to them) a maximum amount of R2,000.00. While we secure this payment in part for placing the business with them, understand it also serves as payment for our services to you over the Life of the Project Policy. Sometimes, of-course a project can be very large in value, making the Insurance Premium costly and so bringing into question the potentially high Broker Commission amount. In these instances it may be best to secure payment to ourselves on a fee basis. So, Insurers are paid NET of the Broker Commission due to us (That is, our Broker Commission is not included in the Premium due to them from yourselves). You then make payment to us on a Time Cost plus Disbursements basis per Guidelines (SA Government Gazette) issued by the Engineering Council of South Africa. [Refer www.ecsa.co.za “Engineering Rates” Indicative Time Based Fee Rates for details of these Time Cost guidelines] Generally what are the Corporate/Business Risks to be considered and what Risks are you specifically trying to handle on our behalf, that is by transferring these over to the Insurance Industry? Enterprise-Wide Risk Management analyses will generally show that the Risks can be broadly categorised along the following Four risk elements: 1) Financial Risks: These would relate to all commodity-price fluctuations; whether related to inputs (raw materials) and/or outputs (finished goods). With commodity-price fluctuations there would of-course arise the consideration of exchange-rate fluctuations. The Insured would, if required, most likely seek to contain their risks in this regard via various Capital Market instruments (Forward Cover, etc). We are not involved in this area of Risk Transfer but could facilitate the necessary ‘network-contacts’ to secure solutions. 2) Strategic Risks: This to our minds relates to the full strategic analysis carried out for example via the use of the well known “Porter’s Five Forces” Model or similar. Here you are essentially trying to stave-off (be prepared and avoid) any negatively impacting global market dynamics or for that matter forces eroding market share or brand integrity. We are not involved in this area of Strategy and Risk analyses but will of-course make mention of same should it be fairly obvious to us and/or known to us from our previous experiences in similar Industries/Projects. 3) Hazard Risks: Standard Property risk exposures. Typical ‘Property’ insurance policies albeit at the best of times ‘cut to customer’ (Insured’s) specifications. Some consideration to capital expansion Projects, New Projects, Plant Extensions, Plant Additions, Plant Life Extensions, Maintenance and Overhaul – Project/Contract Works insurance cover should also be considered here. This is generally where we are indeed capable of providing a ‘Risk Transfer’ service to you. 4) Operational Risks: Deemed to be partly a ‘follow-on’ from the previous risk element and it too is insurable. Arguably, this could relate to Machinery Breakdown and/or Electronic Equipment Insurances and all consequential loss considerations embraced by a Business Interruption (and Advanced Loss of Profit for Contract Works) policy. This too, is generally where we are capable of providing a ‘Risk Transfer’ service to you.