Post on 22-Oct-2014
What to expect … ?
• Introduction to INSURANCE• Various Insurance needs of Projects• Introduction to Marine Insurance• Introduction to Construction Insurance• Introduction to ALOP• Brief Analysis of Major losses in Thermal Power Plants.
What is Insurance ?
Financial Definition – Insurance is a financial arrangement that redistributes the costs of unexpected losses.– Insurance PoolInsurance Pool
It’s a Risk Management Tool– Risk TransferRisk Transfer
Legal Definition – Insurance is a contractual arrangement whereby one party agrees to compensate
another party for losses– Insurance is a branch of Contract LawInsurance is a branch of Contract Law.
Insurance ContractsDistinguishing Characteristics
Principle of Indemnity
Insurable Interest Actual Cash Value
Doctrine of Adhesion
Personal ContractUtmost Goodfaith
Entire and UndivisibleProximate Cause
Policies are not transferable automatically to new owners
The Policy and Proposal forms and other documents filed at the time of
insurance forms one single contract Exception :•Life, PA
•Reinstatement Policies•Valued Policies
More than one party may have an insurable interest in the same property
Actual Cash Value :Replacement value - Depreciation
Contra proferentum
0
5
10
15
20
25
30
1999 2001 2003 2005 2007
P rivate P layers
P ublic P layers
R s . '000 C r.s . ')))
20 %
35%
OVERVIEW OF THE INDIAN INSURANCE MARKET
Key changes in the market
1. Many products detariffed, other products to get detariffed.
2.Regulatory changes
3Segment focused players entering
4Many product innovations in the market
5. Private players taking large market.
GROWTH OF PREMIUM IN THE MARKET
911
14
18
25
PENETRATION OF FINANCIAL SERVICES AS % OF GDP
General Insurance Premium as % GDP
SITE
Operational Covers :FireFLOPMBBoilerMLOPEEI
MARINE & STORAGE CUM ERECTIONMARINE & STORAGE CUM ERECTION
CIVIL CONST.
STORAGEERECTIONTESTINGCOMMN.Foreign
Supplier
OR
IAR
IntermediateStorage
FabricatorsFabricators LocalSupplier
PortPort
TransportMarine (Imports)Marine (Indeg)Marine DSU
Intermediate StorageOffsite Storage-Additional Transit
ConstructionMCEEAR (SCE)CARTPLCPMALOP
MARINE CARGO INSURANCE
It covers…..
• The Physical Loss or Damage to property in Transit from one place to the other
• Starts from :• Suppliers Factory / warehouse• During Transit• During Transhipment, if any
• And Ends at :• Project Site
Who should take the Insurance ?
• Insurable interest depends on the Terms of Sale• C.I.F. - Responsibility of SELLER• C & F - Responsibility of BUYER• F.O.B. - Responsibility of SELLER upto placement of
Cargo on Board the mode of conveyance.
Period of Cover
• Starts • from the time goods leave suppliers factory / warehouse
• Ends• Air Shipments
• 30 days after discharge from the aircraft at the destination airport
• Sea Shipments• 60 days after discharge from the vessel at the destination port
• Rail / Road Consignments• 7 days after arrival of the goods at the carriers godown at the
final destination
• These time limits can be extended on payment of additional premium
What is Covered ? What is Not Covered ?
• I.C.C. (A)• All Risks Cover subject to the following exclusions :
• Improper Packing• Willful misconduct of the Insured• Ordinary Leakage, loss of weight/volume• Inherent Vice• Financial Insolvency or Default by the Carriers
Stranding
SITE
Operational Covers :FireFLOPMBBoilerMLOPEEI
CIVIL CONST.
STORAGEERECTIONTESTINGCOMMN.
OR
IAR
MARINE & STORAGE CUM ERECTIONMARINE & STORAGE CUM ERECTION
Foreign Supplie
r
IntermediateStorage
FabricatorsFabricators LocalSupplier
PortPort
TransportMarine (Imports)Marine (Indeg)Marine DSU
Intermediate StorageOffsite Storage-Additional Transit
ConstructionMCEEAR (SCE)CARTPLCPMALOP
Contractors All Risks Insurance (CAR)
Erection All Risks Insurance (EAR)
Insured
• Only one EAR policy • Joint insureds
• Principal• Contractors• Sub-contractors
• Manufacturers or suppliers
if they carryout the erection work or responsible for it
Policy
Two Sections
Section – I Section – II
Third Party Liability
Material Damage
Section – I Material Damage
Subject Matter Insured
Site erection and testing of :
• All kinds of individual machines
• All kinds of industrial plants
• All kinds of steel structures
• Civil engineering works• Temporary• Permanent
Scope of Cover
Any sudden and unforeseen loss or damage occurring to the property insured on the erection site during the period of insurance will be indemnified.
All Risks Format
“Otherwise not Excluded”
Perils Covered
• Location Risks
• FLEXA perils• STFI perils• EQ, • Subsidence, landslide, rockslide• Theft, burglary
Perils Covered
Human Risks
• Faults in erection• Negligence,• lack of skill, • lack of
experience, • Malicious acts
Perils Covered
• Operation Risks
• Short-circuiting, arcing, excess
voltage etc
• Excess pressure or vacuum, or
tearing apart on account of
centrifugal force
Perils Covered
• Handling Risks
• Any other sudden and unforeseen events : such as
• collapse, • foreign objects, • on-site transport
of items to be erected etc
Additional Covers
In addition :• Construction Plant and
Machinery• Surrounding Property –• Expenses incurred for debris
removal• Additional expenses –
overtime, holidays, • Air Freight• Additional Customs duty• TPL, Cross Liability• Escalation• Maintenance Visits Cover• Extended Maintenance Visits
Cover
EXCLUSIONS
• Loss or damage due to• faulty design• defective material or casting• bad workmanship
Consequent Physical damage is covered. Rectifying the original fault is still not covered.
Not related to erection work proper. Falls within the scope of Manufacturer’s guarantee.
“Buy-back” of this cover is possible with “Additional Premium”
• Loss or damage due to :• Willful act• Willful negligence• Of the insured or of his representatives
•Loss or damage due to :• War• Warlike operations• Civil commotion• Requisition by order of any public authority
EXCLUSIONS
• Nuclear Perils• Normal wear and tear and gradual deterioration• Inventory Losses• Consequential loss of any kind or description
Such as :• Penalties• Losses due to delay• Lack of performance• Loss of contract
EXCLUSIONS
Period of Cover
Commences immediately after the unloading of the items to be insured at the site
Continues during :• Storage• Erection• Testing and
commissioning
Duration of testing operation is usually 4 weeks
Extendable on payment of additional premium
PROJECT PERIODSPROJECT PERIODS
PLANNING
TRANSIT
ON SITE STORAGEHANDLINGCONSTRUCTIONERECTION
COMMERCIALOPERATION
COLD /PRE -TEST
HOT TEST
SCHEDULED DATE OFCOMMENCEMENT OF INSURED BUSINESS
Defects Liability Period
Extended MaitenanceCover
INSURANCE PERIOD
CAR / EAR
Provisional AcceptanceCertificate
Final AcceptanceCertificate
ReliabilityTest
Performance Test
Sum Insured
• Should be Completely Erected Value of the Project
• In accordance with the
works contract
• Includes :• Erection machinery
and equipment at new replacement
value• Freight• Customs Duties• Erection cost
Sum Insured
It is important to declare the full sum insured as indemnity is calculated to the extent items are included in the sum insured
• Average Clause
• Premium Adjustment Clause •Premium Installment Section 64 VB
Indemnity
In the event of a loss or damage the insurers will indemnify the insured for the expenses necessary to restore the damaged machinery or plant to its condition immediately before the occurrence of the loss or damage
Indemnity
Expenditure includes :• Disassembly• Freight• Reassembly costs• Specialists expenses, if necessary
Less : salvage Less : Deductible
Deductible : eliminates small losses where administrative expenses exceeds losses and helps loss minimisation
Scope of Cover [ Section-II ]
Legal Liability arising out of property damage or bodily injury suffered by third parties and occurring in connection with the erection work on or near the erection site
However, it is not a replacement for Principals or Contractors General Liability Covers.
Exclusions [ section-II ]
The Insurers will not indemnify any claims from :
Employees or Workmen
Of the Insured connected with the erection project
Workmen’s Compensation Policy or Personal Accident Policy takes care of this
INTERESTS INVOLVED IN A PROJECT
OBJECT OF “ ALOP ” INSURANCE
TO INDEMNIFY THE PRINCIPAL OR OWNER OF A PROJECT
FOR THE ACTUAL LOSS SUSTAINED
DUE TO A DELAY IN COMPLETION OF THE INSURED WORKS
THIS DELAY MUST BE CAUSED BY DIRECT PHYSICAL LOSS OR DAMAGE
COVERED UNDER THE MATERIAL DAMAGE SECTION OF SCE POLICY
NOT EXCLUDED BY “ ALOP ” - ENDORSEMENT
PROJECT PERIODSPROJECT PERIODS
WHAT IS CLAIMABLE ?
LOSS OF NET PROFIT
STANDING CHARGES PAYABLE DESPITE THE LACK OF INCOME
INCREASE IN EXPENDITURE TO REDUCE OR AVOID THE DELAY TO START-UP
MAXIMUM INDEMNITY PERIOD
ONLY ONE CLAIM PER POLICY
Indemnifiable Accident
Non-Indemnifiable Accident
Indemnifiable Accident
Indemnifiable AccidentBuild upBuild up
of theof the
sum insuredsum insured
Indemnifiable Delay to be adjusted for Indemnifiable Delay to be adjusted for time excess for reinstatement with same time excess for reinstatement with same
designdesign
INSURED AND UNINSURED DELAYS
SCHEDULED BUSINESS
COMMENCEMENT
FIRE, NEGLIGENCE
STRIKE, SHORTAGE OF MATERIALS
UNINSUREDDELAY
INSURED DELAY
INDEMNITY PERIOD
ALoP Insurance In a Nutshell
The Insured in ALoP is the PRINCIPAL ONLY Concurrent material damage (MD) insurance Same Insurer(s) for ALoP and MD Extremely good co-operation between all parties Insurance period identical to MD erection period Accident not immediately followed by indemnity period Only one claim per policy Only one time excess per policy Max. indemnity period sufficiently long
PROJECT RISKS RATINGPROJECT RISKS RATING
Sum InsuredAbove Rs. 100 Cr.
ButBelow Rs. 2500 Cr.
Sum InsuredBelow Rs. 100 Cr.
Sum InsuredAbove Rs. 2500 Cr.
LOSS ANALYSIS IN THERMAL POWER LOSS ANALYSIS IN THERMAL POWER PLANTSPLANTS
FIRES IN THERMAL POWER PLANTS DURING 1988 - 2004
Sl No
The Plant Location Date & time of fire
Estimated Loss in Rs. Crores
Cause of fire
1 2x60 MW & 3x110 MW, Tamilnadu
Cable gallery 10.10.98 0.62 Cable fault
2 1x210 MW & 4x110 MW, Haryana
Coal handling plant
05.06.92
01 30 hours
0.60 Spontaneous ignition of coal
3 3x200 & 2x500 MW, WB Generator transformer
21.04.1995
22.44 hours
0.65 Internal fault in transformer
4 7x210 MW, Tamilnadu Boiler house 03.10.1995 >0.50 Leaking oil from burner was ignited by hot surface
5 2x500 MW, Orissa Turbo generator 04.10.1995 >0.50 Ignition of hydrogen air mixture
6 6x110 MW, WB Coal conveyor 16.02.1996
12 50 hours
1.0 Ignition of coal dust by electrical sources
7 4x67.5 MW, MP Turbo generator 14.12.1996
12.45 hours
>0.50 Failure of insulation caused fault at generator windings leading to short circuit
FIRES IN THERMAL POWER PLANTS DURING 1988 – 2004
Sl No
The Plant Location Date & time of fire
Estimated Loss in Rs. Crores
Cause of fire
8 2x500 MW, UP Current transformer
May 9,21,25 & 27, 1997
2.5 Voltage peak generating hysteris and eddy currents led to overheating and fire
9 3x200 & 2x500 MW, WB Sulphur hexa flouride (SF6) current breaker in Switch Yard
10.12.1997
23 40 hours
>0.50 Short time contact relay failed, overheated SF6 gas under pressure ruptured the breaker
10 7x210 MW, Tamilnadu Boiler house 03.10.1997
21 30 hours
0.80 Leaking oil from burner was ignited by hot surface
11 4x210 & 3x500 MW, Maharashtra
Coal crusher house
28.12.1997
05 30 hours
>0.50 Conveyor belt was ignited by a faulty electrical equipment
12 4x210 MW, Karnataka Warehouse 03.03.1997 >0.50 Failure of thermal relay in air conditioner ignited rubber goods stored below it
FIRES IN THERMAL POWER PLANTS DURING 1988 - 2004
Sl No
The Plant Location Date & time of fire
Estimated Loss in Rs. Crores
Cause of fire
13 4x60 MW, AP Bucket elevator of air heater hopper
14.07.1997
18 05 hours
0.65 Oil coating on plates during boiler start up ignited and was aggravated by fresh combustible air stream
14 7x210 MW, Tamilnadu Current transformer in 230 KV switchyard
15.09.1997
18 02 hours
0.23 Failure of paper insulation of “R” phase due to ageing or overheating
15 6x50 & 3x100 MW, Tamilnadu
Turbo generator 28.05.1998
19 00 & 22 05 hours
3.0 Spillage of lube oil ignited by hot surface
16 2x7.5 & 1x4 MW, Rajasthan
Coal yard 03.06.1998
14 30 hours
1.0 Spontaneous combustion
17 6x210 MW, Punjab 250 MVA Generator transformer
29.04.1998
20 20 hours
>0.50 Internal fault
FIRES IN THERMAL POWER PLANTS DURING 1988 - 2004
Sl No
The Plant Location Date & time of fire
Estimated Loss in Rs. Crores
Cause of fire
6x210 MW, VTPS, AP 240 MVA Generator Transformer
31.07.1998 0.47 High pressure pushed out one of the three ``bushings'' with a great force causing a blast and ignited subsequently.
18 4x60 MW, AP 65 MVA Generator Transformer
21.08.1998
06 00 hours
0.70 Insulation failure
19 6x110 MW, KTPS, AP Turbine hall 11.12.1998 >1.0 Lube oil ignited on contact with hot surface
19 6x210 MW, Karnataka 250 MVA Generator Transformer
10.03.2001 6.5 Fault at transformer bushing
20 6x20 MW, Karnataka Generator Transformer
18.06.2001 >0.50 Fault at transformer bushing
21 2x60 & 3x110 MW, MP Turbine building 28.06.2001 5.0 Lube oil ignited on contact with hot surface
Sl No
The Plant Location Date & time of fire
Estimated Loss in Rs. Crores
Cause of fire
22 Captive power plant, Jharkhand
Steam Turbo Generator
11.3.2002 14.0 Short circuit in cables at cellar. Fire spread to generator and caused fault at generator winding
23 7x210 MW, Tamilnadu Boiler house 04.09.2002
16 45 hours
1.0 Conveyor belt ignited by a faulty electrical equipment
24 60 MW, Captive power plant, Gujarat
Turbo generator 02.03.2001
10 00 hours
75.0 Lube oil ignited on contact with hot surface
25 180 MW, Mumbai Fire gas desulphuriser
11.02.2002
09 32 hours
5.0 Sparks from gas cutting ignited polypropylene packing material in desulphurisation tower
26 6x210 MW, APGENCO, AP
Furnace oil tank 29.07.2003 0.75 Hot work
27 3x210 MW, North Chennai Thermal Power Station, Chennai
Cable cellar 05.12.2004
03.00 hours
1.0 Short circuit
FIRES IN THERMAL POWER PLANTS DURING 1988 - 2004
Sl No
The Plant Location Date & time of loss
Estimated Loss in Rs. Crores
Cause of Loss
27 2x100 MW, APGPCL, AP
Turbine Hall 11.03.2007 >15.0 Steam turbine break down
28 368 MW, LANCO, AP Plant entrance 15.09.2003 0.25 Heavy winds caused collapse of ornamental concrete structure at the entrance
OTHER LOSSES IN THERMAL POWER PLANTS
Area / equipment % of fire incidents
1 Transformers/Switching equipments
30
2 Generator area 15
3 Coal handling/conveyor 22
4 Boiler area 7
5 Lubricating oil system 7
6 Cable gallery 3
7 Turbine 3
8 Others 13
Total 100
Questions??