Fubon Financial

Fubon Insurance Recommends Civil Engineering Completed Risk Insurance in Light of Heavy Rain


Recently, there have been incidents of disastrous rain causing damage to bridges and roads throughout the nation. As the typhoon season approaches, Taiwan may experience heavy downpours that are just as devastating as the spring rain season. In light of the potential risks they have on infrastructures and buildings, Fubon Insurance recommends inclusion of Civil Engineering Completed Risk Insurance into overall project risk planning.

Due to Taiwan's unique geographical features, natural disasters have caused substantial losses to properties and lives. Civil engineering projects and infrastructures are especially vulnerable to natural disasters, given the extensive financial losses they may involve. However, property insurances in Taiwan contribute little to covering this risk. According to statistics published by Morakot Post-Disaster Reconstruction Council, Executive Yuan, and The Non-Life Insurance Association of the Republic of China, Typhoon Morakot caused approximately NT$180 billion in financial losses in 2009, but only NT$2.3 billion or 1.24% of the loss was covered by property insurance. Also in the event of 921 Earthquake, insurance covered only 4.03% of the losses suffered. Almost all of the losses are being covered using the central government's reconstruction budget. This excess budget presents a financial burden so heavy that funding of other regular projects had to be cut back, which ultimately affects the nation's ability to grow and adds a burden to taxpayers.

In an attempt to promote competitiveness of the insurance industry, the Financial Supervisory Commission has been encouraging non-life insurance providers to develop new insurance policies, and with the assistance of the Non-Life Insurance Association and reinsurance service providers, "Civil Engineering Completed Risk Insurance" (CECRI) products became available since 2008. CECRI brings coverage to civil engineering facilities and related electromechanical equipment such as roads, bridges, elevated powerlines and airport runways, whether the damage is due to disaster or vandalism. However, according to statistics of the Non-Life Insurance Association, there are only a handful of cases covered by CECRI since its introduction, and the sum of coverage represented less than one-ten thousandth of total construction projects. Meanwhile, CECRI is widely used in countries such as Korea, Japan and Malaysia that are equally prone to the threat of typhoon, flood, earthquake and other natural disasters.

In Korea, for example, all BOT projects funded by the government since 2002, such as Incheon Airport, high-speed railway, expressway, tunnels etc., have been covered by CECRI. The amount of annual premiums has been estimated at NT$600 million to NT$750 million. The 311 Earthquake brought devastating destruction to Japan in 2011. Fortunately with the coverage of CECRI, all earthquake and Tsunami damages amounting to tens of billions of Yen to the Shinkansen (high-speed rail system), the JR train, station and rail were claimed back from insurance companies.

These examples explain how important risk management tools and CECRI are to protecting infrastructures such as roads, railways, airports, ports and hydraulic projects. Not only do they provide assurance to sufficient reconstruction capital, they also cover assets against losses and alleviate the government's financial burden to the benefit of the nation and its people.