Definition:Erection all-risks insurance
🏗️ Erection all-risks insurance is the insurance product that provides comprehensive coverage against physical loss or damage during the installation, assembly, and commissioning of machinery, plant, and equipment at a project site. Often referred to by its abbreviation EAR, this product sits within the engineering insurance class and is distinct from contractors' all risks coverage in that it focuses on mechanical and electrical erection activities — such as assembling turbines, process lines, refinery units, or telecommunications infrastructure — rather than on civil engineering or building construction. The policy is widely used across global markets and is a staple of project insurance programs for energy, industrial, and infrastructure developments.
⚙️ Coverage under an erection all-risks policy is structured on an all-risks basis, meaning that any cause of physical loss or damage is covered unless specifically excluded. Standard exclusions include war, nuclear contamination, willful misconduct, and pre-existing defects — though defects exclusion clauses are carefully negotiated, with the widely used LEG (London Engineering Group) clauses defining the extent to which the cost of rectifying defective design, materials, or workmanship is excluded or partially covered. The policy usually extends through a testing and commissioning phase, because a significant proportion of losses in erection projects occurs when equipment is first energized or brought up to operational load. Third-party liability and optional delay in start-up sections round out the protection. In international project finance, lenders typically require evidence of erection all-risks coverage as a condition of drawdown, and the policy must name the lender as loss payee under the loss payable clause.
💡 The importance of erection all-risks insurance to the global insurance market stems from the high values at stake and the technical complexity of the risks involved. A single turbine blade failure during installation, a crane collapse, or a fire during hot commissioning can generate losses running into hundreds of millions of dollars, making sophisticated underwriting and reinsurance arrangements essential. Specialist underwriters — concentrated in London, Munich, Zurich, and Singapore — rely on engineering surveys, loss-prevention reports, and detailed project schedules to price these risks. The product also illustrates the collaborative nature of insurance markets: large EAR placements are frequently coinsured among multiple carriers through subscription panels, with a lead underwriter setting terms and following markets accepting shares. As renewable energy construction accelerates worldwide, particularly offshore wind and solar installations, erection all-risks insurance has become a growing and evolving segment of the market.
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