Insurance for Construction of Power Plants Reduces Costs

Vietnam Insurance Corp. and Mc. Larens Young International, an appraising company, co-hosted a conference on "Insurance and Damage Reduction in Construction and Installation of Power Plants" on October 22, 2004 in Hanoi.

Risks often seen during the construction and installation of power plants are natural disasters, fires, installation errors, breakage and other damages during the transport of equipment and machinery. When carrying out a financial calculation of a project, investors and contractors cannot know the exact value of damages which may occur during construction. They may, via prior experience and statistical calculations, make a relative estimation of damages if risks occur. However, they would not be able to cover the cost of such unexpected damages themselves. If an insurance contract is signed for construction and installation of a power plant, beneficiaries of the contract will include investors, architects, engineers, advisors, contractors and sub-contractors.

The major subject of the insurance contract is the power plant works themselves. Investors are aware of the exact insurance premiums, which are considered a small sum in comparison with the total value of the project. During the conference, experts showed that insuring the construction and installation of power plants will help enhance the economic value of the capital outlay and may actually reduce the overall cost of construction works.

• Thi Van