Definition:Construction all risks insurance (CAR)
🏗️ Construction all risks insurance (CAR) is a specialized property insurance product designed to cover physical loss or damage to a construction project during the course of building works, including materials, equipment, and the structure itself, on an "all risks" basis — meaning it responds to any peril not specifically excluded, rather than listing only named perils. Widely used across global construction and infrastructure markets, CAR policies are a cornerstone of engineering insurance, protecting principals, contractors, subcontractors, and lenders against the financial consequences of events such as fire, storm, flood, theft, collapse, and design errors (where covered).
🔧 A typical CAR policy comprises several sections. Section I covers the contract works — the physical construction itself, including permanent and temporary works, materials on-site or in transit, and sometimes offsite storage. Section II provides third-party liability coverage for bodily injury or property damage arising from the construction activities. Additional sections may address existing structures owned by the principal, construction plant and equipment, and consequential losses such as delay in start-up (DSU) or advance loss of profits (ALOP). The policy period runs from commencement of works through to practical completion, often with an extended maintenance or defects liability period. Underwriting a CAR policy demands deep technical expertise: underwriters evaluate project specifics including contract value, construction methodology, soil conditions, natural hazard exposure, the experience of the contractor, and the risk management practices on site. In markets like London, Singapore, and the Middle East, CAR placements for large infrastructure projects frequently involve coinsurance panels or reinsurance support due to the significant sums insured.
🌍 CAR insurance underpins the global construction economy. Without it, contractors would struggle to obtain project financing, as lenders and project sponsors require evidence of adequate insurance before releasing funds. The product also plays a critical role in public-private partnerships and government infrastructure programs worldwide. Across jurisdictions, CAR wording can vary — the Munich Re and Swiss Re model forms are widely referenced, and local market wordings may incorporate jurisdiction-specific requirements. In developing markets experiencing rapid urbanization, demand for CAR coverage has grown significantly, bringing both opportunity and aggregation risk challenges for insurers. As construction methods evolve — with modular building, 3D printing, and green construction techniques — CAR underwriters must continually adapt their risk assessment frameworks to keep pace with changing exposure profiles.
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