Insurance Options for Project Owners
“Trust in God, but tie your camel.” – anon
The ability of any business model to reliable generate project revenues and net income for its partners is key for both impact investing (also delivering measurable benefits to people and planet) and “single bottom liners” as well.
Even commodity projects and ventures must earn sufficient net income to sustain operations over the life of the business, the essential “engine” of the regional economy where the business operates, creating jobs, delivering products and/or services that often make a difference in people’s lives. If not, why do it?
Insurance is an after-thought to many project developers, who see it as necessary only to address serious risks and hazards, while we’ve found the process of arranging insurance — whatever policy coverage, if any, is justified to support future operational success. This process identifies and then removes (transfers, avoids or mitigates) all known and unexpected risks that have any reasonable chance of impacting a proposed project, its assets and owners.
How In3 CAP funding handles risk differently
Unlike traditional project finance where financiers seek to kick out any and all remaining risks, once commercial/business risk is reasonably low (creditworthy customer/offtaker in evidence), CAP funding is able to accept technology, execution/operational, credit risk (for example, first-time borrowers without 3 years of audited financials are not a problem), process risk (CAP funding can come in before final engineering/design work is complete), development risk (additional steps to and costs to begin and/or complete construction), political risk, currency/hedging risk (yes, we can invest in local currencies other than US$ or Euros), and a host of other risks, if present.
Knowing this in advance helps us form an equity partnership that makes projects investible that would otherwise go nowhere without a lot of additional work. Even then, far too many projects in traditional finance circles do not survive due diligence. Our mission is about
- Management Liability (EL PL/D&O/PI/Crime/Office, etc.)
- Construction and installation
- Operational
- Property & Casualty
- Trade Credit and Political Risk
- Contract Performance Bonds and Surety elements
- Advanced Loss of Profit, Business Interruption and Delay in Start Up
The Underwriters are all “A” Investment Grade Credit Rated as evidenced by AM Best, Fitch, Moody’s and Standard & Poor’s which independently attest to their financial strength, contract certainty, secured claim settlement and stability. By the very nature of the inception, contract certainty and securitization afforded by the proposed “insurance wrap”, the Underwriters’ Investment Grade Credit Rating of “A” will automatically transfer across to the proposed project.
CAP funding does not require insurance, but some of our alternative funders definitely want to know if a project is insurable before due diligence as a way of identifying and ultimately mitigating their perception of risk. This can help expedite closings, as In3 we can work with the preferred underwriter or broker with whom clients wish to engage, if requested.
In addition, some of our funding partners will want to pursue alternative insurance products known to them, for which we would request a copy of the schedule and wording, with any previous client details redacted. Thereafter, In3 and its insurance services provider will work with the client and our funders to source and secure coverage if or as necessary.