PPP in Baltic States
Mitigating Project Risks by Insurance
Mark Courtneidge
November 2006
Aon Limited is authorised and regulated by the Financial Services Authority in respect of insurance mediation activities only
Presenter
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Mark Courtneidge BA(Hons), FCII, AIRM - Director
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29 years in insurance industry, 12 at Aon
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Is responsible for the risk and insurance aspects of
numerous projects in the UK and overseas
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Project Allenby and Connaught
UK Immigration and Prison Services
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Much of Mark’s vast experience has been gained
within in house risk management
Aon London PPP Experience
• UK
– Approx 350 projects
– All sectors
– Concessionaires/Authority/Financiers
• Overseas
– South Africa
– Japan
– Poland
– Holland
– USA
Aon Worldwide
• Primary Activities
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Risk Indentification & Analysis
Risk Transfer & Management
Insurance Solutions
Claims & Loss Solutions
• Corporate Numbers
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120 countries
550 offices
46,000 FTEs
9,8 Bln USD revenue (‘05)
Aon in The Baltics States
PPP Contacts
Aon Estonia
Erko Toomet
 +372 699 6226
 [email protected]
• Aon Latvia
Ivars Kiecis
 +371 789 2551
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[email protected]
• Aon Lithuania
Andrius Masteika
 +3705 252 6099
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[email protected]
The Players in PPP
Authority
Equity/Partners
Special Purpose
Vehicle (SPV)
Construction
Sub-contractor
Designers/
Engineers
Sub/Trade
contractors
Facilities
Management
Sub-contractor
Banks
Service
Provider
Sub-contractor
Insurance as a Risk Management Tool
• Identify Risk
• Quantify Risk
• Manage Risk:
– Avoid
– Control
– Transfer: Insurance
Why Insure in PPP
• SPV balance sheet/cash flow protection
• Bank’s comfort and protection of their loan
• Authority’s comfort that SPV can continue to
operate in event of “defined” losses
• Debate on PPP is risk transfer - Insurance
provides this
Core Insurances
Construction Phase
• Contract Works
• Construction Plant
• Existing Assets
• Marine Transit (Cargo)
• Advanced Loss of Profits (works and cargo)
• Third Party Liability
• Professional Indemnity
• Employers Liability
• Motor
Core Insurances
Operation Phase
• Material Damage
• Business Interruption
• Third Party Liability
• Employers Liability
• Motor
Other Insurances
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Environmental Impairment (Gradual)
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Latent Defects (New Assets)
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Directors & Officers Liability
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Crime
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Archaeological Finds
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Keyman
Insurance Programme Design
• Conformity with agreed requirements of
– Concessionaire (SPV)
– Authority
– Financiers
– Sub contractors
• Broad Coverage
• Insurer Security
• Competitive Premiums
• Longevity of Programme
PPP Contract/Loan Agreement Insurance Structure
• Insurance Administration
– To effect insurance
– What if insurance is not available
– Special Requirements of Authority &/or Banks
• Details of Minimum Insurance Requirements
– Construction Phase
– Operational Phase
Special Requirements of Authorities &/or Banks
• Non-vitiation
• Subrogation waivers
• Cross liability clauses
• Loss payee requirements
• Notification of changes
• Minimum cancellation periods
• Joint Named Insured
• Acceptable Insurers Security
• Brokers Letter of Undertaking
• Third Party Claims Handling Rights
• Right not to reinstate
Things To Watch Out For
• Involving Insurance advisers too late
• Unclear risk allocation and insurance requirements
• Unrealistic insurance advice
• Have all risks been fully considered and priced
– eg. “As new” values on existing structures
• Construction to Operation Gap
• Are Changes catered for
Aon PPP Services
Concessions
• Risk Analysis
• Advice on Contractual Risk Management
• Risk and Insurance Negotiations
• Design Insurance Programme
• Place and Service Insurance Programme
Aon PPP Services
Financiers & Authorities
• Risk Analysis
• Advice on Contractual Risk Management
• Advice on Insurance Requirements
• Risk and Insurance Negotiations
• Audit Insurance Programme
• Ongoing Monitoring
Aon Approach
• Teamwork
– Non adversarial
– Experienced
– Focused, project specific
• Philosophy
– Proactive
– Practical
• Worksteps
– In depth knowledge of Project
– In depth knowledge of Players
– Risk matrix
– Contract advice and negotiation
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• Two separate phases
• Construction plus 5 years
minimum period
• Cross class programme
• Single Insurer Panel all
classes
Works
DSU
TPL
Operational
MD/BI/TPL
EL
Crime
HET
• Specialist/unique vehicles
• War zones risk
– Vehicles
– Drivers
• Consequential loss on vehicles
Aspire
• GBP 1 billion existing assets
• GBP 1 billion new/refurbishment values
• 11 year construction
• Multiple sites
• Project PI
South Tees
• Major existing assets
• Major new build
• Multiple handovers
• Multiple decants
• Latent defects
• Major variation order
Contact
Should you require any further detailed information pertaining
to any points in this presentation, please contact
Aon’s offices in the Baltic Countries, and/or:
Mark Courtneidge
Natural Resources & Construction, London
Tel: 44 207 086 4311
Mob: 44 7899668030
Email: [email protected]
Jaap Veenenbos
Risk Consulting CEE
Tel: 31 104487954
Mob: 31655798912
Email: [email protected]