Construction Risk and Insurance solutions Aon Latvia

Construction Risk and Insurance solutions

Aon Latvia

Jaap Veenenbos, managing director Risk Consulting & Construction

Aon Central Eastern Europe

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Content

1. Introduction to Aon Construction2. Aon Risk Based approach, crafting the right solution3. Typical construction insurance4. Innovative solutions for construction risk

Jaap VeenenbosManaging director Risk Consulting & ConstructionAon Central Eastern Europe

Aigars MiltsCountry manager Aon Latvia

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Aon plc.

Aon’s three main business units

Aon HewittAon BenfieldAon Risk

Solutions

Retail Brokerage

Risk Assessment

and Advisory

Employee Benefits

Benefits

Administration

Captive Management

Affinity Programs

Premium Finance

Claims Advocacy

and Administration

Select Personal

Lines

Treaty reinsurance

brokerage

Facultative

reinsurance

brokerage

Capital Markets

Financial Advisory

Analytics and

Technical Services

Claims Management

Human Capital Consulting

Executive & Broad Based

Compensation

Total Rewards

Employee Communications,

Engagement & New Media

Solutions

Human Resource Business

Processing Outsourcing

Aon plc.

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Aon Baltics

The Largest Insurance broker in Baltic States

The Head office held in Vilnius, branches are in Kaunas, Alytus, Klaipeda and Riga, Tallinn

104 employees

The total amount of insurance premiums written in year 2013 reached 40.4 MEUR

Aon Baltic Latvian Branch

13 employees – high caliber professionals

Written premiums in year 2013 – 6.3 MEUR

Our Mission: To deliver superior client value !

CEO

Aon Baltic Management Team

Aon

Lithuania

Aon

Latvia

Aon

Estonia

Pan-BalticBusiness Lines

Accounting and Finances

Support functions

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Aon Construction

Broker for 50 % of top 50 global contractors

1.000 + global team of construction specialist

Advisor on 475 PPP projects globally

Global Construction annual Premium total 3.830 million $

– Europe 390 million $

– UK 200 million $

– CEE 20 million $

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Aon CEE Risk Consulting & Construction team

CEE, dedicated construction team, advising:

– Principals (public sector, private sector)

– Contractors

– Developers

– Financiers

Industry sectors:

– Infrastructure (motor roads, rail roads, airports)

– Power generation (coal, gas, nuclear, wind, solar, thermal)

– On shore energy (gas distribution, electrical grid)

– Utility buildings (manufacturing plant new builts)

– Commercial real estate (high rises, amusement parks)

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What Is the Risk ? !

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Expect the unexpected, in the old days

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Expect the unexpected, nowadays

M6 Motorroad concession Hungary

Paris airport France

Metro drilling

car deck restaurant

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Content


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Probability

impactsmall

Show stoppers

Reduce both probability via

prevention and impact via

repression or alternatives

Reduce probability via

preventive measures

Remain in control over cause

Reduce impact

Anticipate on risk, ensure

conditions

Insure

Acceptable risk

Retain (self finance)

Cost of risk in budget

catastrophic

low

high

Not all construction risks can be insured

Non

insurable

risks

Partially

insurable

risks

Insurable

risks

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Risk Management

Risk Quantification

Risk Allocation

Not Transferable Transferable

Risk Identification / Assessment

Bonds DerivativesInsurance

ProductsFinancing ART

JV / Third

Party Transfer

Balance sheet protectionOn balance sheet

Risk Allocation

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Aon Risk Based Approach

Aon

expertise

Prelimanary design construction all risk policy

Final design construction all risk policy

Risk AnalysisContractor/Principle

expertise

Project specific risk profile

Max loss exposures

Risk mitigation (contract, management)

Limits, sub limits, deductibles

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Aon Risk Based Approach‘Crafting’ the right policy-coverage

Advice client

Prelimanary design

Close covers

Negotiate and define final wording

Understanding project risks

Assess offerings

Approach CAR insurers WW

Rehearse

until

Lowest

Cost of

Risk

solution

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Standard build contract

General Contractor

Sub contracting Sub contracting

Engineer

supplier

Sub contractorr

Architect

Principal

Supplier

Sub contractor

Insu

ran

ce

Investor

Advisorsdesign

Project management

Program of requirements

ROI

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Categories of risk

Assets Revenues

Liabilities

• Property damage

• Construction

• Design

• Third party damage

• Direct financial loss

• Continuity

• Legal

• Contractual

• Legislation

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We review following documentation:

• project information memorandum

• project layouts

• specifications for related works

• geotechnical report

• environmental report

• time schedule

• project structure: parties involved

• key project contracts (or drafts) with: Employer, Designers, Sub-contractors,

Suppliers, others

• insurance requirements of: the Employer, financial institutions e.g. banks (if

any), others

• copies of all insurance policies related to the Project

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2. Risk & Insurance Strategy

• Risk and insurance strategy design, including risk and insurance

allocation

• Insurance costs estimation / e.g. for tender purposes

• Advisory in negotiations with employers, designers, sub-contractors,

suppliers etc. (hereinafter referred to as “partners”) related to risk and

insurance

• Advisory in designing Chapters “Risk & Insurance” in tendering and

contracting “the partners”

• Review and comments, concerning insurance requirements provided by

third parties eg. employers, subcontractors…

Aon Risk Solutions

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3. Insurance Broking Services

• Designing complex insurance programs

• Obtaining insurance proposals from the insurance markets

• Obtaining insurance bonds proposals (bid, performance, maintenance,

advance payment) from the insurance markets

• Placement & daily handling of insurance and bonds programs

• Insurance and claims handling procedures design and implementation

• Preparation of “Insurance Manual”

• Claims handling: site surveys if necessary, assistance and support in

preparing documentation, claims letters, negotiations with the insurance

companies, etc

• Insurance trainings

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Content


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Main classes of insurance 1/2

Revenue InsurancesAsset Insurances Liability Insurances

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Statutory InsurancesPeripheral Insurances

Main classes of insurance 2/2

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Construction allrisk, true allrisk:

Loss of, or physical damage to, interest insured,

Whatever cause (closest to real all risk)

Including:

• faulty design,

• faulty material and

• faulty workship,

• including the fault itself

Maintenance cover based on full quarantee

– up to 3 years (exceeding by far, standard extended or visit

maintenance)

Triggers Delay in Start Up cover (compensates revenu losses)

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Who should take out insurance ?

General Contractor

Sub contracting Sub contracting

Engineer

supplier

Sub contractorr

Architect

Principal

Supplier

Sub contractor

Insu

ran

ce

Investor

Advisorsdesign

Project management

Program of requirements

ROI

Contractor

Owner

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Contractor controlled versus owner controlled 7/7

1. Insurance Policy Control Owner / Developer - Flexibility Multiple contractors – Low flexibility

2. Policy Administration Aon – Centralized Contractors own insurance agencies?

3. Policy WordingManuscripted broad-form policy

– All Stakeholders interests

Standard wording designed for the

contractor – keep the costs down

– Contractor’s interests

4. Insurer Selection & Security Owner Selected Contractor Controlled

5. Uniformity of CoverageConsistent

– Avoids cross party disputesInconsistent among contractors

6. Delay in completion coverage

Available

– Aids ability to finance

– Broad CAR expands coverage

Unusual

– No financial interest

– Confidentiality issues

7. Phased completion and early

generation coverage

Yes – Interfacing issues between

construction and operation are addressedNo – Construction phase only

8. Access to Insurance marketStreamlined consolidated approach

efficiently utilizes market capacity

Individual approach restricts available

market capacity

9. Insurance Premium Cost Leveraged purchasing generates savings

Profit center for contractors and their related

insurance agencies and insurance

companies

10. Premium PaymentOwner directly

– Full Transparency

Owner pays through contractors

– Minimum transparency 2

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Program Features OCIP CCIP

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Content


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Solutions per Construction Sector

Investors and Principals

Developers and

Project Managers

Banks, lenders Other parties

Contractors

Architects, Engineers

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An innovative solution covering all parties involved

Aon Construct

Integrated

coverage

Las Palm

Directors

&

Offciers

LiabilityGeneral Third Party Liability

Environmental Liability

Environmental Damage

Constructon All Risk

Material Damage

Erection All Risk

Leg3/De5

Planning/Design Liability

All parties at first party basis

Delayed Start Up / Business Interruption following damage /

pure financial loss coverage,

local fronting coverage

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Contact details

Aigars MiltsAon Baltic Latvia Branch

Country manager

T: +371 6789 2555

M: +371 2938 9194

[email protected]

Jaap Veenenbos MSc.

Managing director Risk Consulting & Construction

Aon Risk Solutions CEE, Russia and CIS

+ 31 20 439 5679

+ 31 655 798 912

[email protected]

Office:

Paalbergweg 2-4

1105 AG Amsterdam, the Netherlands

mailto:[email protected]

Construction Risk and Insurance solutions Aon Latvia

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