By- Arun Garg, Director, Insurance – Equirus
Climate change and growing risks of force majeure
“One Earth” was the theme of this year’s environment day.
India over the past few years has witnessed a multitude of cyclones on both the east and west coasts. Moreover, the frequency and severity of these disasters are increasing. Major floods on all rivers also have an impact on damage to private and public property. Man-made flooding situations in metros and high places in the city are very common these days and people are learning to live with these risks.
At the same time, India’s infrastructure sector, the housing sector, public and private, is building like never before. The general insurance industry is also poised to protect the risk associated with these sectors and respond quickly to changing times.
So what is going to be subject to project risk due to this changing environmental condition?
While our country is experiencing rapid development in the basic sector. Some of the areas driven by activities are road infrastructure, railway infrastructure and projects, dams and irrigation, power and renewable energy projects, oil and gas projects, airports, railways, metros, multimodal transport centers and warehouses, Telcom Infra, water supply, waste water. treatment, waste management, etc.
Typically, project contracts are broadly priced with a clearly defined implementation plan. It also required enormous logistical support and infrastructure as well as specialized handling facilities and equipment. For many projects, a large skilled construction workforce is hired. Huge material storage and preservation requirements are basic necessities at project sites. Thus, any force majeure and CAT Nat (natural disaster) situation can have a major impact on all kinds of resources involved in such projects.
Therefore, a tailor-made risk transfer mechanism through insurance programs becomes an essential element in the implementation of such a project and, subsequently, to manage the operational aspect as well.
Comprehensive insurance programs are the key to protecting against financial loss
Traditionally, project management infrastructure and space has been cost sensitive due to the low margin available and the long gestation period to completion of projects. Generally, most projects suffer from delays and costs. Such a situation may result from a variety of reasons such as the contractor, plan or design changing mid-stream, litigation, environmental factors, and physical loss/damage to assets from natural disasters and service interruptions. related activity resulting in financial impacts on the project.
Although risk sharing through insurance is an essential parameter, most organizations (owners), contractors and subcontractors follow a minimum cost allocation for insurance risk programs. The approach is more compliance centric than risk sensitive, which creates a big gap between the subject of risk v/s and the assignment of insurance coverage.
Sustainability is the mantra
Sustainability is the mantra for growth in an increasingly competitive world. Climate change is an acceptable fact now. Warming oceans leading to ecological imbalances, major climate changes across geographies and leading to an unprecedented increase in natural disasters.
Organizations involved in the infrastructure space are open to a qualitative discussion on the insurance risk transfer part. Thanks to digitization, many digital tools are now used to assess risk levels based on key inputs such as climate informatics, weather theme, thermographic study and various incremental changes and upgrades. and evolving related to policy formulation.
The insurance broker plays an important role in bridging the gap between the information sought by the insurance company (the underwriter) and the key details of the subject matter of insurance (the risk) from an underwriting perspective. . Correct interpretation and articulation of risk helps both optimize cost and improve coverage. In addition, during the inspection phase of the project, various risk advisory measures also add value to the overall risk reduction and risk prevention.
What happens if there is a natural calamity and a major claim situation arises for a project
Insurance is a practice, based on the principles of underwriting. The claims situation is the litmus test and the moment of truth not only for the insurer but also for the insurance broker involved in the bespoke design of the insurance solution. Typically, project insurance claims follow certain processes and documents. A knowledgeable and knowledgeable partner can help at every stage of the claim by helping the client out of the crisis situation through financial compensation through the realization of an insurance claim.
About Equirus Insurance Broking Pvt. ltd.
Equirus Insurance Brokerage Pvt. is a full-service insurance broker and part of the Equirus group. Equirus Group is a leading investment bank and offers a full range of financial services to corporate and HNI clients with services spanning equity capital markets, debt capital markets, structured finance, capital -investment, mergers and acquisitions, insurance brokerage and wealth management. Its wholly owned subsidiary Equirus Securities is a member of NSE and BSE.
Equirus Insurance specializes in project and infrastructure insurance due to the Group’s presence in the infrastructure sector. The motto of the Equirus Insurance service is to be the knowledge partner bringing the best insurance solutions to its customers at an optimal cost. Equirus focuses on presenting the benefits of science-based risk management and protection against financial risk/loss situations arising from any uncertainty.