Historically the insurance industry’s involvement in any project has been relatively late in the process. Often it was a case of the last item to be ticked off the checklist has been to ensure that the insurance is in place. However, in more recent times insurers have imposed more restrictions on the cover they are prepared to provide, which has in some cases necessitated a change in the contracting structure to accommodate the insurance policy(ies). In addition, changing contractual practices have changed the allocation of risk between the various parties involved.
This calls for a more proactive approach to the design and implementation of an insurance program for both the construction and operational phases of any resource project.
This paper explores how a risk managed approach to the design and implementation of an insurance program for a resource project can align itself with current management approaches to project development.
From the authors’ experience, this approach is best adopted early on in the project (often in conjunction with the bankable feasibility study) and follows AZ/NZS4360 to objectively examine and compare a wide range of risk exposures of the project in a time-effective manner across the following areas:
- general management;
- compliance – legislation, systems, protocols;
- asset management;
- change management;
- financial impacts to the organisation;
- service delivery; and
Having identified and then analysed the risk exposures according to common consequence and likelihood ratings the next step is to develop a risk map of all considered exposures.
The true value of this approach lies in the development and implementation of a risk treatment plan for identified exposures where the exposure is unacceptable. The plans will lead to the optimal solution to the appropriate risk prevention, risk mitigation and risk transfer options available.
This paper also examines other benefits to the project that may arise from adopting a risk managed approach in addition to the ability to design an insurance program which recognises the exposures and the ability of the organisation (and other project parties) to retain risk.
Watson, N, 2007. A
managed approach to project insurance, in Proceedings Project
Evaluation 2007, pp
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