Wing Kwong Choy
Infrastructure development is a powerful force in today’s global economy with hundreds of billions of dollars being spent every year repairing, replacing, and building new capabilities for transportation, power, utilities, energy, ports and terminals, and social infrastructure. Governments look to the private sector to help finance projects, while additional industry participants – developers, contractors, banks, accounting and law firms, consultants, and others – play important roles in the infrastructure lifecycle.
Infrastructure project stakeholders may have different drivers. And their challenges and risk profiles change throughout a project’s lifecycle – from bidding through pre-construction, construction, operational, and ongoing management phases.
With over 25 years of specialist experience, our team is ideally positioned to support your risk and insurance decisions. Our specialists understand the divergent risk tolerances of the public sector, equity investors, lenders, and the construction sector.
During financing, we provide strategies and solutions that reduce the volatility of infrastructure initiatives and make projects bankable. Through planning, design, construction, and operations, we provide insights and effective risk mitigation and asset management strategies that address changing risks through projects’ phases.
Our global team can help preserve the final asset value, reduce revenue stream volatility, and help manage inherent risks so you can redeploy your capital effectively.
Any company or entity actively investing in an infrastructure project, as well as other key project stakeholders, should consider insurance to adequately protect their interest and manage their risks throughout the project lifecycle. The size and type of project may limit the ability to meet contractual requirements for insurance, so it’s important to engage an insurance and risk advisor early to help negotiate these requirements and tailor insurance solutions that can minimize the potential impact of project risks.
In addition, risk mitigation strategies through each stage of the project lifecycle provide essential support by identifying and managing potential issues for all stakeholders. Risk comes up in the planning and design phases, all the way to physical construction and infrastructure implementation, so it’s important to provide a safety net to ensure a smooth and seamless project completion.
This type of insurance generally functions to protect project stakeholders from risks associated with the most common pain points associated with developing infrastructure.
Invariably, third-party liability risk coverage is involved since by their very nature most infrastructure projects will be exposed to the public. Beyond this, insurance typically covers aspects of risk associated with physical loss to a project, whether due to a natural hazard such as a flood or windstorm, or resulting from damage caused by contractors or the general public.
For infrastructure developments involving private finance, insurance coverage would also extend to cover financial risk due to such factors as a delay in a project completion (resulting from physical damage) or errors and omissions arising from design-related professional services.
Innovative insurance solutions have been developed to cover a wide range of risks – from rain and temperature variation (weather insurance) to insuring subcontractor default. Since there is so much variation in risk allocation for a given project, it's important to consult a risk advisor, such as Marsh, to manage your specific risk exposures.
Large infrastructure projects, although immensely valuable to society in the long run, have a longstanding reputation for becoming problematic. Delays due to unforeseen events like supply chain issues, prolonged stretches of inclement weather, labor disputes, and disagreement of stakeholders on major project decisions can end up costing taxpayers and private investors a great deal of money.
Although some of these risks cannot be addressed in advance, such as stakeholder disagreement, others can in some ways be mitigated through risk management planning. Risk management advisors can help infrastructure firms strategize in advance to protect themselves from common issues, while also providing claims and recovery support if those issues come to bear.