Risks Faced by Egyptian Contractors and How to Insure Them Blog Image

Risks Faced by Egyptian Contractors and How to Insure Them

11 November 2023

Constructing in Egypt is not limited to mere fine crafting and strategic planning; it also involves learning the myriad of risks that exist in the business. Ranging from the deadly weather elements to the partisan labor strikes and material shortages, Egyptian contractors deal with various challenges that have a great potential of completely plunging the progression of times, costs, and the entire project success.

In this series, we embark on a journey to the field of insurance for Egyptian contractors’ risks coverages, we look into the diverse varieties of insurance available, the key elements of comprehensive risk management, and finally the benefit and how you are better off when working with skilled and experienced insurance providers. Together let's explore the fundamentals using valuable tips that will guide all contractors in the process of protecting their projects from unexpected events and success in Egypt's fast-moving construction industry.

Understanding the Risks:

Construction projects in Egypt are confronted with a unique set of challenges and uncertainties, demanding a thorough understanding of all risks in insurance for contractors:

·         Health and Safety Hazards: Construction sites are acts of life-threatening accidents, inclusive of falls, electrocution, and injuries caused by the machinery.

·         Project Delays: There may be many unplanned events that can disrupt your project completion date like unforeseen weather conditions, material shortages etc. as well as staff disputes that can create a financial loss.

·         Third-Party Liabilities: Subcontractors may be held liable for legal suits from third parties for these reasons which include property damage and injury inflicted during their construction activities.

·         Contractual Obligations: Contractual legal breaches, for instance, lack of adherence to deadlines for project and quality standards, can lead to financial penalties or legal suits.

·         Political and Economic Instability: In Egypt, political instability, changes of government regulations, and economic dips are likely to affect the development sector, particularly the construction industry. One of the things that can be affected is that even more than other areas, project finance, material availability, and project effectiveness may be at stake.

·         Supply Chain Disruptions: Imported materials and equipment dependence of projects to global trade policies, shipping delays, or geopolitical tensions might be the constraint of these supply chain disruptions. Any hiccup in the supply chain might trigger consequential delays and budget overruns.

·         Environmental Factors: The geographical variance of Egypt poses environmental issues especially due to high-intensity weather, seismic activities, and flooding. Not considering such aspects as environmental factors during the design stage and project risk assessment process can result in damage to properties, project delays, and inflated costs.

·         Labor Shortages and Skill Gaps: Labor shortages and technical skills deficits are usually the main challenges for the construction industry in Egypt, that mostly result from the lack of skilled workers in the field of specialized trades and professional specialties. Workforce capacity does not match the project needs, and as a result, the progress of the project suffers from delays and quality issues happening.

·         Technological Risks: Along with the changed construction methods and technologies, the risks rise as well. Innovative construction approaches, advent of advanced equipment and software systems lead to the emergence of various vulnerabilities including the cyber security threats, equipment breakdowns and technical glitches.

Role of Insurance:

1.      Construction All Risk (CAR) Insurance: CAR insurance offers complete coverage against risks connected to the insured’s projects, for example, equipment or structure damage that may happen at the designated site. It also includes compensation for the loss or injury of third parties’ property or persons as a result of construction activities.

2.      Professional Indemnity Insurance: This insurance provides designers, supervisors, and contractors coverage against losses or liabilities arising from errors, omissions, or faulty supervision in designing plans, supervising work, or managing projects in ensuring financial protection if their liability is tested in court.

3.      Delay in Start-Up (DSU) Insurance: DSU insurances make provisions for remuneration of contractors in such eventualities wherein their projects are delayed beyond their control, materially easing the financial burden of delay.

4.      Public Liability Insurance: Contraction of public liability policy is not too different from contractors who will continue to cover their selves against claims for bodily injury or property damage to others or when the activity is being run hurting third parties

5.      Worker's Compensation Insurance: Providing coverage of medical expenses, loss of wages, and rehabilitation for the employee who falls ill or injured due to performing the job duties are an umbrella of the insurance. In Egypt, where labor regulations require employers to provide a safe and secure working environment contractors arise from the obligation of having workmen's compensation cover without devastating the physical and psychological health of the employees.

6.      Construction Plant and Equipment Insurance: Contractors are in the main, using machines efficiently and equipment to do construction projects in order to gain productivity. The construction plant and equipment insurance gives policyholders property protection against accidents, theft or malfunction of the important surroundings. Therefore, if contractors take adequate care of their equipment, they can avoid problems in project completion times as well as posses good work standards.

When is the insurance reimbursed?

Risks contractors are usually, takes place as an insurance reimbursement when events of the insured event that are mentioned in the insurance policy occur. These events which include commitment error either in regard to accidents, damages, or losses that the contractor may encounter as a result of the project are the worst.

For example, if there is damage to the building site due to natural disasters like storms and earthquakes, or if there is theft of equipment and supplies, the company insurance can pay the contractor the amount needed to cover their financial losses.

Clear and precise criteria for reimbursement will be specified in the insurance policy, but the specifics will depend on the contractual conditions according to which such policy was negotiated. It becomes essential to tackle all insurance policy conditions which include the covered events and the reimbursement duration. Moreover, the insurance company officials to be quickly and fully informed about any incidents is the crucial condition to launch the claims repairing automatically.