PROJECT CARGO/HEAVY LIFT - Insuring Project Cargo

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Project Cargo insurance is as specialized as the projects themselves are. As Steve Weiss, Liberty International Underwriters’ Director for Marine Risk explains, from inception to start-up, insurance is a key feature in any project cargo undertaking.By George Lauriat, Editor-in-Chief, AJOTWhat is Project Cargo? Defining what constitutes ‘project cargo’ is difficult since nearly every move related to an oversized item or odd piece of equipment can fall into this grand basket. To a degree, it matters not whether that item is a yacht, a wind turbine, or part of an oil refinery. The delivery requires special, and in many cases exceptional, expertise.
Insurance companies must also be skilled, from both an engineering, and from a financial perspective, in order to understand and assign risk to such multi-million dollar undertakings that characterize project cargo moves.
Houston-based Steve Weiss, Director Marine Risk LIU (Liberty International Underwriters) offered the AJOT some insights into the frequently financially large and technically challenging project cargo insurance market.
From a very general point of view, project cargo is virtually any oversized cargo or items requiring special handling, ranging from yachts and refinery equipment to space shuttles. However, from an insurance perspective, project cargo includes oversized materials and equipment that are essential parts of civil and engineering-related infrastructure projects. Although offshore oil activities are often lumped into the project cargo business, they are for these purposes considered a separate category.
According to Weiss, LIU began working in the Porject Cargo market in 1999 as one of the company’s Specialist Lines of business. The Project Cargo “risk manager” was one of the first lines of business undertaken by the new division.
When asked by the AJOT to characterize the size and movement of the project cargo business, Weiss said, “To ballpark it, [project cargo market] there’s been an upturn. Year-to-year the market changes. Basically, it follows the GDP (Gross Domestic Product). Right now, that demand is up in China and Asia. In the 1990s, it was North America and Europe, and in 2000-02, it was India.”
Because the projects are often vital to a nation’s infrastructure [i.e. bridges, hydroelectric plants, LNG/LPG or power plants] the number of participants involved in the multi-million dollar process can include everything from power and oil companies to government bodies. To this can be added engineering contractors, freight specialists and financial interests. All of these diverse project participants share a common interest in abdicating the sizeable risk that accompanies these large-scale projects.
Worldwide, LIU handles around 30 major project per year, a major project being defined as an undertaking with a potential of US$1 billion or more. In addition, LIU handles around 50-75 smaller project cargo ventures valued between $50-$200 million.
Project cargo insurance covers physical loss or damage to the items while they are in transit from the manufacturing site to the construction site. In many respects, the scale and complexity of the projects is reflected in the unique way that project cargo insurance is written, Weiss explained. For starters, in most cases, project cargo insurance must be in place even before financing, site preparation or equipment orders. The combination of insurance, assembly of project capital and equipment manufacturing can translate into years of lead-time before operations actually commence on the construction site.
It’s a high stakes business and few companies have enough chips to play. Weiss says that the number of firms willing to underwrite project cargo is very “stable.”
“The high limits has limited the pool of insurers undertaking project cargo,” Weiss said. In this regard, LIU is in an enviable position with enough financial capacity to provide “lead” on the insurance for project cargo.
Because of the billions of dollars that are ofte

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American Journal of Transportation