CONSTRUCTION & OIL TERMINALLING

RISK EXPOSURES AND RISK TRANSFER SOLUTIONS

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• IOT’s Business Matrix

• IOT’s Insurance Program

•Risk Exposures

•Claim Scenario

•Risk Transfer Matrix

•PI Cover

•Way Forward

Agenda

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Some Of Our Clients We Are Representing

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• IOT Infrastructure & Energy Services Limited (IOT) a technical and logistics solutions provider with domain expertise in

• Engineering Procurement & Construction (EPC),

• Terminalling,

• Upstream Services,

• Renewable Energy.

• Internationally benchmarked standards across all business models

• Successful handling of crude oil, petroleum products and petrochemicals as a storage provider

• Some major achievements across Pan India like Mumbai, Chennai, Goa in the following fields:

• Independent terminals,

• Storage provider, Refinery Tankfarm,

• Common User Terminals

• Operations & Maintenance

• 18 terminals with a capacity of 2.9 million KL

IOT Business Matrix

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IOT Business Matrix Contd…

• IOT’s EPC vertical, an integrated engineering, procurement and construction service provider to the Oil & Gas, Power and Infrastructure sectors

• Areas of expertise:

• Service Provider from Concept to Commissioning

• Full in-house EPC Capabilities

• Proven Track Record in the Power Sector

• Synergies with Terminalling Business

• Global experienec in completing and commissioning EPC projects

• Employ over 2,000 people and have a business presence in over 11 countries.

Variety of operating models

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• CAR/EAR/ policy directly as a main contractor

• CAR/EAR Covered under main contract policy

when working as a sub-contractor

• Covered also for Marine risks

• Property coverage SFSP/IAR for operational

assets

• Terrorism/Political risks/ Credit risks not covered

• Covers need to be clarified on these Liability

products

• D&O

• Public liability/CGL

• PI

Our Understanding Of IOT Insurance Programs

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• Involves in significant investment

• Long implementation period

• High exposures to potential losses from perils such as

• Design flaws

• Act of God Perils (Earthquake, Flood etc)

• Accidents

• Errors of commission/omission

• These losses could adversely affect the viability

• Time delays and cost overruns (escalation)

• Wrong project estimations

• Coordinating with multitude of contractors

• Comprehensive insurance cover is the necessity for

addressing the requirement of all the stake holders including

lenders.

Risk Exposures In Infrastructure Projects

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• Case1: Lower tier sub-contractor agreement/sub-contractor management .

• A main contractor engaging in a sub-contractor on a package basis would be responded for the actions of the sub-contractors

• Case 2: Performance specification/non-adherence/delays in execution

• Over & above the LD which may be triggered due to delay, the EPC contractor may be sued for the dereliction of duty

• Case 3: Defective design

• Contractors PI would be triggered in case of defective design / workmanship resulting in latent fault manifesting into a claim

• Case 4: Inadequate supervision during construction

• Professional negligence for lack of supervision for e.g in a civil contract design drawings provided for bracing at a particular level was aimed at sectional drawings

Claims Scenarios

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Risk Transfer Framework

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Professional acts, errors or omissions

Mitigation costs

Sub-contractor liabilities

Defence costs

Loss of documents

What Does PI Cover?

Covered Contractor Activities

Feasibility studies Detailed designs

Geotechnical studies

Surveying (Quantity and

Land)

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Extensions

• Continuous cover

• Claims preparation costs

• Libel, slander and defamation

• Court attendance costs

• Extended notification period

• Intellectual property

• Inquiries

• Joint venture

• Merger / takeover / sale / winding-up of

insured – run-off coverage

• Newly created / acquired subsidiary

company

• Past subsidiary company

• Public relations expenses

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Some Exclusions

• Aggravated, Punitive, Exemplary damages, Fines

or Penalties

• Employer’s liability

• Prior claims and circumstances

Vulnerabilities :Types of Damages

0% 10% 20% 30% 40% 50% 60%

Bodily Injury -Construction

Bodily Injury -Other

Property Damage

Economic Loss

% of Claims Dollars

% of Claims Count

Vulnerabilities :Sources of Claims

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Architect

Civil

Structural

Mechanical

Electrical

Other Claim Dollars

Claim Count

Fees

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• Understanding IOT’s contractual risk sharing arrangement

• Understanding current insurance program

• Operational assets

• CGL/Public liability/D&O

• Terrorism/Political risk

• Customer credit

• Finalize the risk transfer mechanism

• Determination of Limit of Liability

• In-principle decision to proceed

• Collating of underwriting information

• Detailed discussion on policy structure

• Approach various Insurance and Reinsurance markets

Way Forward

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Thank you