Definition:Contractor's all risks insurance (CAR)
🏗️ Contractor's all risks insurance (CAR) is a specialized property insurance product that covers physical loss or damage to construction works, materials, and equipment during the course of a building or civil engineering project. Written on an all-risks basis, CAR responds to any peril not specifically excluded by the policy wording — a structure that provides broad protection against fire, storm, flood, theft, collapse, and accidental damage throughout the construction period and, in many cases, during a defined maintenance window after project handover.
🔧 A standard CAR policy typically comprises several sections. Section I covers the contract works themselves, including permanent and temporary works, materials on-site, and materials in transit. Section II provides third-party liability coverage for bodily injury and property damage arising from construction activities. Some policies extend to cover existing structures — particularly important in renovation projects — and to include delay in start-up coverage when project completion timelines carry financial consequences. Underwriters price the policy based on the total project value, construction method, location exposures, duration, and the contractor's track record. The sum insured typically reflects the full contract value, and deductibles are adjusted to the scale and risk profile of the project.
🌍 CAR insurance is a cornerstone of international construction and engineering risk placement, with significant volumes flowing through markets like Lloyd's of London and large global reinsurers. For project owners, lenders, and contractors alike, a well-structured CAR program provides confidence that a catastrophic event will not derail the financial viability of a development. It also satisfies the insurance requirements embedded in most standard construction contracts, such as FIDIC and JCT forms. In an era of increasingly complex infrastructure projects and heightened natural catastrophe exposures, CAR underwriting demands deep technical expertise in both construction methodology and risk engineering.
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