【亚开行】太平洋地区保险基础设施指南-2024.8

Summary of A Guide to Insurable Infrastructure in the Pacific

Core Content

This guide outlines the challenges and opportunities for insuring infrastructure projects in the Pacific region, emphasizing the importance of insurance in supporting resilient and sustainable development. It is a collaborative effort by Willis Towers Watson (WTW) and supported by the Asian Development Bank (ADB) and the World Bank, with contributions from the Pacific Regional Infrastructure Facility (PRIF) and other development partners.

Main Viewpoints

• Resilient infrastructure is vital for economic growth, job creation, and local income generation, especially in the context of climate change and the Sustainable Development Goals (SDGs).
• Insurance is essential to mitigate the financial risks associated with infrastructure projects, including natural hazards, delays, and other project-specific risks.
• Insurance markets in the Pacific are underdeveloped, with limited financial capacity and coverage, making it difficult for contractors to obtain appropriate insurance at reasonable prices.
• Risk management is critical for both project stakeholders and insurers, as it reduces uncertainty and enhances the feasibility of obtaining insurance.

Key Information

Infrastructure Insurance Landscape in the Pacific

• The Pacific region faces region-specific risks such as natural disasters (tropical cyclones, earthquakes, tsunamis, volcanic activity, flooding, and drought), remoteness, and limited financial resources.
• PRIF partners have a pipeline of over $3.2 billion in infrastructure projects for 2023–2025, with nine projects exceeding $100 million and 33 projects under $5 million.
• The insurance industry in the Pacific is limited, with only a few regional insurers and brokers operating. These include Tower Insurance, Capital Insurance, QBE Pacific, and New India Assurance.
• Reinsurance is provided by Pacific Reinsurance Ltd. (PNG) and international firms like Swiss Re, Munich Re, Trans Re, Hannover Re, and R+V.
• Brokers such as IHL, Kanda, WTW, Aon, Marsh, and Lockton are active in the region, with some having direct licenses in Pacific countries.

Insurable Infrastructure Risks

• Infrastructure projects typically go through six life cycle stages, each with associated risks:
  • Initiation: Risk of project cancellation.
  • Planning: Scope changes and technical feasibility complexity.
  • Design: Design errors and time overruns.
  • Construction: Safety issues, accidents, delays, and natural hazards.
  • Operation and Maintenance: Inability to reach desired service levels.
  • End of Life: Decommissioning and hazardous waste issues.
• Risk is highest during the construction phase and lowest during planning and design.
• Sector-specific risks are also discussed, including transport, energy, and other critical infrastructure sectors.

Insurance Products and Requirements

• Insurance products available vary by country, and natural hazard insurance is rarely available locally, requiring contractors to seek coverage through the international market.
• Best practices for contractors include:
  • Understanding available insurance products and their coverage limits.
  • Investigating local insurance legislation.
  • Deciding whether to approach insurers directly or through brokers.
  • Conducting early risk engineering surveys and adhering to building codes.
  • Demonstrating quality management and risk mitigation to reduce premiums.

Challenges in Insurance Access

• Key challenges include:
  • Insufficient information provided to insurers, leading to higher premiums or no coverage.
  • Inconsistent and piecemeal information requests from insurers.
  • Small-scale insurance transactions not being attractive to insurers.
  • Limited local insurance capacity and high premiums, making it difficult for smaller contractors to bid on projects.

Risk Reduction Measures

• Risk reduction measures are recommended for all stakeholders to improve project resilience and reduce insurance costs.
• These include:
  • Quantifying risks to enable rational insurance pricing.
  • Following building codes and using performance-based design.
  • Demonstrating construction quality management to show good risk control.

Recommendations for Procurement

• Procurement teams should ensure that insurance requirements are:
  • Proportional to the risks of the project.
  • Not overly restrictive to avoid limiting competition or hindering contractor profitability.
• Recommendations include:
  • Splitting contracts into smaller sections based on local contractors' capabilities.
  • Encouraging the use of SOURCE, a multi-partner platform that supports infrastructure development.
  • Developing training programs in risk management for local stakeholders.
  • Tailoring insurance requirements to match local market capacity and insurer appetite.

Case for a Regional Insurance Facility

• A regional insurance facility could help address the challenges by:
  • Pooling risks across multiple projects to create diversified portfolios.
  • Reducing insurance costs through economies of scale.
  • Leveraging private sector financing and inviting (re)insurers as investors.
  • Centralizing reinsurance to manage excess risk and minimize costs.

Conclusion

The guide concludes that a pooled approach and improved risk management practices are essential for enhancing insurance access and affordability in the Pacific. It also highlights the need for collaboration among development partners, governments, and insurers to support local contractors and ensure that infrastructure projects are resilient and sustainable.

Appendix Highlights

• Appendix 1: Lists active insurance companies in the Pacific and their products.
• Appendix 2: Matches project life cycle risks with appropriate insurance products.
• Appendix 3: Details information required for contractors' all-risk policies.
• Appendix 4: Provides data on contractors operating in the Pacific by project value.
• Appendix 5: Lists interviewees from October to December 2023.

Glossary

• ADB: Asian Development Bank
• DFAT: Australian Department of Foreign Affairs and Trade
• MFAT: New Zealand Ministry of Foreign Affairs and Trade
• PRIF: Pacific Regional Infrastructure Facility
• WTW: Willis Towers Watson
• SOURCE: A multi-partner platform for infrastructure development

Tables and Figures

• Table 1: Categorizes the infrastructure insurance market by country.
• Table 2–3: Outline risks by life cycle stage.
• Table 4–9: Detail insurance policies, requirements, and risk reduction measures.
• Figure 1: Illustrates the life cycle of infrastructure projects.
• Figure 2: Shows considerations for contractors in obtaining insurance.
• Figure 3: Demonstrates the concept of pooling projects into diversified risk portfolios.

Boxes

• Box 1: Highlights issues that deter insurers from underwriting Pacific infrastructure projects.
• Box 2: Provides an example of insurance requirements that are too high to be obtainable locally.