Last month saw the launch of the ‘The Joint Code of Practice for Risk Management of Tunnel Works in the UK’ prepared by The British Tunnelling Society (BTS) and The Association of British Insurers (ABI). The booklet’s 18 pages set out some pretty stringent guidelines that must be followed by all parties involved in a tunnelling project if they are to stand any chance of getting insurance cover. Make no mistake, here in the UK this is big news, and if you’re sitting in Australia thinking “no worries, this won’t affect me,” think again, an international version is being prepared as we speak!
The code was developed against a backdrop of spiralling insurance claims from the international tunnelling industry, following some high profile collapses. Such claims have been responsible for creating a tunnelling insurance loss ratio of 500%, that’s a $5 payout for every $1 premium (this makes the general construction industry’s 100% payout figure seem positively healthy)! Its small wonder then that the insurance industry eventually said enough was enough.
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From the insurers point of view, it became a situation of “help us out, or lose your cover altogether”. Hence the development of the code, which lists the guidelines the insurers want followed before they feel comfortable/confident with insuring a project. As you would expect, the code dwells very much on risk awareness, assessment and allocation. Central to the document is the production of risk registers that will identify parties responsible for the control and management of established risks. These registers will be cascaded through the life of project to ensure all are aware, at all times, of previously assessed hazards. It certainly doesn’t ask for all risk to be eliminated before insurance is forthcoming. It’s objective is to secure a best practice for the minimisation and management of risks associated with tunnel works; with the ultimate aim of reducing payouts, whilst giving insurers a better understanding of tunnelling risks during project underwriting.
Importantly, insurers insist this is not a way of stopping claims, as alarmists have suggested. The code has been set up to provide insurers with an auditable trail through the project should a claim arise. Basically you’ve asked them for insurance, this is just them asking for some back!
Initial feedback from the UK industry is positive. Many have intimated that the framework actually helps them, by clarifying insurers demands, as much as it helps the insurers. Also, many believe the code will go a long way to boot out any of the few remaining tunnelling cowboys hiding in the background. One thing is certain, if the code is not followed, the insurers won’t insure, and in an industry as risky as tunnelling, that could make the difference between the green light or going home.
Tris Thomas
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