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Wednesday, April 24, 2019

Engineering Insurance


Engineering is the most technical Branch of Accident Insurance. Industrial revolution led to the introduction of engineering insurance due to increased frequent boiler explosions causing damage to surrounding property, injuries or death. Engineering risks are accepted on condition that, boilers and machines are regularly inspected since inspection forms part and parcel of insurance. Proposal forms are the basis of the contract. The consideration for indemnity is the premiums paid upfront by the proposer before commencement of the cover. Indemnity is guided by terms, conditions and exclusions as per the contract. The Accident Insurance products offered therefore may be categorized as follows:

  • Contractors All Risks Insurance.
  • Erection All Risks Insurance.
  • Machinery Breakdown Insurance.
  • Boiler & Pressure Plant Insurance.
  • Electronic Equipment Insurance.
  • Deterioration of Stock Insurance.
  • Engineering Business Interruption Insurance.


Civil engineering works ranging from small buildings to massive dams are susceptible to damage from a wide range of causes e.g. fire, water, storm, impact and internal defects etc. Exposure to damage commences at the time of delivery of materials to the contract site, while the work is in progress and during the subsequent maintenance period when the work is handed over to the principal. During the construction period, we cover the contract works from various risks based on contract requirements i.e. fire and lightning, accidental damage during construction, water damage, floods, storm or tempest, collapse, collision, impact, aircraft, burglary, theft and malicious damage, damage due to defects in materials, design or workmanship and riots, strikes, landslide, earthquake etc. The insured constantly monitors the contract price (Sum Insured) during the policy period in line with inflation costs to march with replacement costs incase of destruction.


Coverage of the policy is divided into two sections. Material damage section provides for items to be lost, damaged or destroyed by any cause. The loss will be made good by repair or replacement subject to of each and every item whereas the third party section covers legal liability of the insured to pay compensation for accidental damage to property of other persons and or fatal injury or non fatal injuries to any person subject to the limits of liability specified in the schedule. In addition, indemnity applies to legal costs recovered by a claimant and costs incurred by the insured with the consent of insures subject to an excess for third party damage claims.


This is concerned with erection of electrical plant and machinery equipment and structures involving no or very little civil engineering work. The manufacturer or supplier is solely responsible for the loss or damage while they are installing, testing and commissioning until handing over to the owner. Erection all risks cover provides comprehensive insurance as the machinery is exposed to many perils. It gives adequate protection for all risks involved in the erection of machinery, plant and steel structures of any kind including third party claims in respect of property damage or bodily injury arising out of or in connection to the execution of an erection project. The sum insured (contract price) is the machinery’s new replacement value which includes freight, custom dues, erection and testing costs, etc.


The standard machinery breakdown policy covers sudden and unforeseen physical loss or damage to the insured’s machines while at work or at rest or during cleaning, inspection, overhauling or removal to another position in the premises necessitating repair or replacement. The policy covers boilers with auxiliaries, electrical equipment, alternators and generators, mechanical plants including engines, turbines, pumps, lifting equipment including cranes and lifts. The insured reviews regularly the sum insured to represent the new replacement value which includes installation costs and customs dues, freight charges, cost of repair and expenses for employment of a specialist etc.


Damages may include:

  • Faulty design, material, erection or construction faults at the workshop.
  • Short circuit, failure of insulation and other electrical causes.
  • Faulty operation, lack of skill, negligence or malicious acts.
  • Tearing apart due to centrifugal forces.
  • Failure of connected machinery or protective devices.
  • Falling impact or collision.
  • Obstruction or entry of foreign objects.


The insurance also referred to as Boiler Explosion Insurance covers boiler and pressure vessels explosion or collapse in the course of ordinary working and seeks to indemnify the insured against:

  • Damage to the insured’s boiler and or other pressure plant.
  • Damage to surrounding property of the insured.
  • Legal liability to third parties of the insured on account of bodily injury, fatal and or non fatal to the person.
  • Damage to the property of third parties.


All the equipment (computer system and its peripheral as well as auxiliary equipment) are susceptible to damage or breakdown. The insurance herein therefore takes care of loss or damage to such properties.

We have two sections under this policy:

  • Material damage: Covers loss or damage to the equipment from accidental causes.
  • Consequential Loss: Following claims under material damage, it seeks to cater for increased cost of working e.g. hiring alternative facilities, loss of business e.t.c.


The policy covers sudden and unforeseen physical loss, damage necessitating repair or replacement. It includes electrical and mechanical damage, impact damage, negligence, theft and burglary, fire and special perils.

The items covered include:

  • Electronics Data processing (EDP) Equipment.
  • Electronic equipment for medical use.
  • Telecommunication and navigational equipment.
  • Computer system for production plant & machinery.
  • Signal and transmitting units.
  • Equipment for research and material testing.


The sum insured is the cost of replacement including installation charges, transport charges, custom duties etc.

The company indemnifies costs and expenses incurred during the indemnity period to maintain data processing operations to their previous extent.


The insurance is issued against deterioration of goods in cold storage due to breakdown of refrigerating machinery.


We have freezing conditions which have a controlled atmosphere ( 22% carbon dioxide, 4% oxygen and 74% nitrogen) and normal atmosphere. The insured’s in this policy could be the owners, users or tenants, meat or fish processing industries, food preservation industries etc. This insurance compliments machinery breakdown insurance and is given on accommodation basis.


The policy covers:

  • Rise or fall in cooling temperatures.
  • Unforeseen and sudden escape of refrigerant into the cold storage rooms.
  • Under-controlled storage or incorrect composition of atmosphere resulting in any form of material damage to the refrigeration plant indemnifiable under machinery breakdown.

It may be extended to cover deterioration due to failure of public power supply as long as the position regarding public and backup supplies is found to be satisfactory.


The insurance looks at the actual loss of Gross Profits due to business interruption occasioned by an event covered under machinery breakdown insurance.( Sudden and unforeseen damage including breakdown to plant and machinery.) When a key item of the machinery breaks down, the insured is faced with expensive costs of repairs. The interruption of the business makes the insured incur huge losses. This insurance seeks to make good the loss suffered by the insured.


The insurance covers:

  • Loss of Profits.
  • Continuing business expenses (the standing and fixed costs).
  • Increased cost of working (i.e. additional expenditure necessarily and reasonably incurred for avoiding reduction in Turnover).
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