Special guidance drawn up after tunnelling projects approach limit of insurability
Crossrail’s insurers have used special guidance drawn up following a series of catastrophic tunnel collapses, the first details of the policy agreement have revealed.
Swiss Re is joined by Zurich as the lead insurer on the £15.9bn London rail project, further supported by excess liability coverage led by QBE and Ace. Heath Lambert brokered the historic nine-year insurance policy without a break clause.
The guidance was thrashed out by the ABI and the British Tunnelling Society, learning from the mistakes of the Heathrow Tunnel Collapse in 1994, which put lives at risk and caused the cancellation of hundreds of flights, as well as tunnel collapses in Hull, Munich’s Metro and Singapore during the past 20 years.
Cedric Wong, a senior underwriter at the corporate solutions unit of Swiss Re, a lead insurer for the London transport project, said: “Ten years ago tunnels were coming close to the limit of insurability. A lot of key markets pulled out of insuring tunnelled projects because the collapses were frequent and, when they happened, the costs associated with repairing them were substantially higher than the premium pool for those risks.
“During the underwriting process, we benchmarked the Crossrail project against the joint code of practice and it benchmarked favourably, and this is one of the elements that gave us comfort.”
Heath Lambert’s head of project risks, Mike Hawkes, said bringing together the parties for Crossrail was “demanding”. He added: “As the broker, we knew the procurement process was going to be demanding. There was a robust but fair procurement process and insurers had to adapt to a new approach in submitting terms.”
There had been widespread speculation that the government might scale back the project in its austerity cuts, but Hawkes said the project had received the “green light” and this was not something being contemplated.
Crossrail is a part government- and private-funded project to build major new rail connections under central London by 2017. Crossrail will cost around £15.9bn, making it the largest construction project in Europe.
A source said the premium for the deal would be in the “multimillions”.