optimising risk financing in major capital projects

Optimising Risk Financing in Major Capital ProjectsPresented by Jon Hetherington

Willis Australia Limited

NATIONAL CONFERENCE & EXHIBITION 2014

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Silver Sponsor Bronze SponsorRisk Manager of the Year

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National Conference & Exhibition 2014

Agenda/Topics for Discussion

• Risk Financing for Major Capital Projects – Key Considerations

• Traditional Insurance Obligations/Requirements

• Lessons Learned/Latest Trends/Developments & Future Directions

• Insurance Procurement Best Practice – “Execution Excellence”

• Take-Aways/Tactics for Strategic Solutions


Risk Financing for Major Capital Projects

Key Considerations

• Project Objectives (Stakeholders Needs & Expectations)

• Experience of the Project Team & Advisors

• Insurance Strategy needs to be fully considered and documented to achieve

best for bid outcomes

• All Stakeholders need to be confident and commit to the Strategy and Program

• Project Finance/Lenders Considerations (Anticipate & Manage Expectations)

BFS, Term Sheet(s), PIM, Notice of Assignment, BLOU and DD reports


Risk Financing for Major Capital Projects

Key Considerations

• Key Risks/Project Risk Profile

Qualification and Quantification Considerations

• Contractual Framework, Delivery & Allocation Methodology

Consistency (Cascaded/Back-to-back)

• Scheduling/Delivery Time-table/Implementation Milestones

Roles & Responsibilities, Plot Activity Schedules & Action Plans


Traditional Insurance Obligations/Requirements• D&C Phase Insurances

Contract Works Material Damage

Consequential Loss / Delay in Start-Up

Project Marine Cargo / Marine Delay in Start-Up

Third Party Liability

Project Professional Indemnity

Contractors Pollution Liability and/ or Environmental Impairment Liability

Worker’s Compensation & Employee Benefits

Plant & Equipment and Motor Vehicles

Marine Hull & Aviation

• Off the shelf policies/traditional structures are being challenged

• Bespoke project solutions becoming the norm


Traditional Insurance Obligations/Requirements• Operational Phase Insurances

Industrial Special Risks/Property/Material Damage

Business Interruption/Consequential Loss

Public & Products Liability

Project Professional Indemnity

Premises Pollution Liability and/ or Environmental Impairment Liability

Worker’s Compensation & Employee Benefits Motor Vehicles

• Off the shelf policies/traditional structures are being challenged

• Bespoke project solutions becoming the norm


Lessons Learned/Latest Trends/Developments

and Future Directions

• State of the Market

• Alignment of Contract with

Coverage

• Image and Reputational Risk

• Collaborative Contracting

• Risk Pools

• D&C Joint Ventures

(Joint and Several/Alliancing)

• Bid Cost Recovery Fees

• Capping of Liability

• Fitness for Purpose/Express

Warranties

• Unforeseen Pollutants

• Relief Events/Abatement Provisions

• Cost Overrun


Insurance Procurement Best Practice

“Execution Excellence”

• Early engagement of insurance advisors pre-document drafting

• Insurable Risk Partnerships and not simply a commodifying culture

• Alignment of All Stakeholder and Project Objectives

• Maximise Outcomes = Define, Document and Deliver

• Comprehensive Suite of Services (much more than purely transactional)


Take-Aways/Tactics for Strategic Solutions

• Best for Bid Outcomes – Marked and Measured

• Trusted Advisors with a proven track record

• Price shouldn’t be the only measure of performance…

Total Cost of Risk

Value

• Insurance complicated by ever increasing contractual responsibilities

• Social and Reputational Risks and potential ramifications

Thank you.

NATIONAL CONFERENCE & EXHIBITION 2014

Platinum Sponsor

Silver Sponsor Bronze SponsorRisk Manager of the Year

Award Sponsor

Conference and Exhibition Partners

optimising risk financing in major capital projects

Economy & Finance