Definition:Contractors all risks (CAR) insurance
🔨 Contractors all risks (CAR) insurance is a project-specific insurance policy that provides all-risks coverage for loss of or damage to civil engineering and building construction works, including associated materials, plant, and equipment at the project site. The product sits at the intersection of property and engineering insurance, and it is one of the most commonly required forms of coverage in the global construction sector. While the terms "CAR insurance" and " construction all risks" overlap substantially in practice, "contractors' all risks" is the designation more frequently encountered in the London market, across Europe, and in many Asia-Pacific jurisdictions, reflecting its origins in policies designed primarily for the contractor's interest.
⚙️ CAR policies are structured around two principal sections. Section I covers the contract works — meaning the permanent and temporary structures under construction — along with construction materials and, in many wordings, the contractor's own plant and machinery on site. Section II provides third-party liability coverage for bodily injury and property damage arising from construction activities. Additional extensions can be negotiated for perils such as delay in start-up, removal of debris, professional fees, and cross-liability among multiple insured parties. Underwriters price CAR policies based on factors including total project value, construction type, duration, geographic catastrophe exposure, and the track record of the contracting firms involved. Claims under CAR policies can range from minor theft or weather damage to catastrophic structural failures, so loss adjusters with engineering expertise play a pivotal role in the claims process.
🌍 CAR insurance holds strategic importance for both the construction industry and the insurers and reinsurers that serve it. Large-scale infrastructure projects — highways, airports, power plants, and urban developments — require CAR coverage as a precondition for securing financing, and many government procurement frameworks mandate it as well. For insurers, the class presents attractive premium volumes but demands disciplined underwriting and strong technical capabilities, given the potential for accumulation of exposure when multiple projects in a geographic area face a single catastrophe event. Regulatory requirements governing CAR insurance vary by market: some jurisdictions impose standard policy wordings or minimum coverage mandates, while others allow fully bespoke terms. As construction activity intensifies in developing economies and climate-related perils elevate project risks globally, CAR insurance remains a dynamic and commercially significant line.
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