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MORE RISK INSURANCE - MORE SAFETY!

The construction industry and the real estate market are some of the fastest growing industries in Georgia today. The growth is visible not only in the housing sector, but also large-scale commercial projects such as hydropower plants, hotel complexes, road infrastructure development and much more.

ტეთრი ამწე

If we look at the statistical data of distribution of FDI in the economic context from 2013 to 2017, record growth is observed in the context of construction, real estate, and hotels and restaurants, which once again demonstrates the development of the industry. The figures are as follows: direct foreign investments in the construction sector amounted to 79.5 million dollars in 2013 and grew to 294.6 million dollars in 2017. In 2013, investments in real estate amounted to 62.3 million dollars, while in 2017 they reached 159.8 million. For hotels and restaurants, by 2017, investments totals went from 7.1 million dollars to in excess of 90 million dollars.

ცისფერ სამუშაო ფორმაში გამოწყობილი ხალხი

Construction is a complex process, where potential risks can come from a variety of sources. For example: - damage or destruction of the construction site and/or machinery/equipment located on the territory as a result of natural disaster; - partial or complete destruction and/or damage to the building as a result of engineering miscalculations, flaws in constructive design or gaffes in the construction process; - disruption of the construction process as a result of unexpected damage/malfunction to heavy equipment; - injured personnel as a result of accident; and various other scenarios.

ადამიანები კაფეში

In such cases, naturally, loss and damages are felt not only by the primary construction company, but also its sub-contractors, workers, investors, and various other third parties. Therefore, when financial sustainability of a construction project is discussed, the role of insurance should not be overlooked. Over time, more and more developers in Georgia have started realizing the importance of construction insurance since insured construction increases the consumer’s (investor’s) confidence and trust in the particular construction company or developer. When insuring construction risks, the insurance company assesses the unique risks pertinent to each individual project, the work that needs to be completed, the contractors’ experience, and subsequently determines the scope of difficulty of the construction. Inclusion of an insurance company in the construction process ensures compensation of financial loss or liability and guarantees consumer (investor) peace of mind – all of which makes for a more reliable and steadfast project. To find out how important insurance is in the construction industry, what kind of products can be purchased and what the demand for insurance is in the construction sector, Forbes Georgia recently talked to TBC Insurance Corporate Business Manager Giorgi Talakhadze.

ყვიტელი კიბეების კონსტრუქცია

Mr. Talakhadze, first of all, could you explain to the reader: why is insurance important during the construction process?

Construction related risk insurance is becoming undeniable more relevant. In recent years, various problems have surfaced in the implementation of complex infrastructural projects. We can recall several instances where construction sites were damaged, and other cases where workers and the surrounding infrastructure were damaged as well. Most of the incidents are related to natural disasters. Unfortunately, failure to adhere to safety norms at construction sites is all too common, and sometimes this leads to fatal outcomes. Considering all of these factors, the construction company deals with a significant amount of damage and loss. That is why we believe that the developer – as well as the client (investor) – need to realize the importance of insurance.

მანქანა დგას პარკინგზე

What types of construction-related insurance products do you offer your potential clients?

In terms of the construction business, TBC Insurance offers several different coverage products:

• Construction risk insurance, which implies compensation for damages to the construction site, temporary constructions, machinery/equipment, inventory, and building materials

• On-site employee accident insurance, which reimburses the cost of medical care or restitution amounts to be paid to the employee and/or their family members.

• 3rd party liability insurance, which compensates property or bodily damage to third parties.

სარბენი ბილიკი

Additionally, the client (investor) can obtain insurance to guarantee the builder’s obligations. With such policy, the client will be compensated for financial loss suffered due to improper execution of construction or negligence.

Based on the reality, do you think it should be obligatory in the construction sector to obtain employer’s liability insurance?

Generally, in sectors where risks of accidents are high due to the nature of the work, I think its highly desirable that the employer acquires insurance.

ადამიანები გადადიან გზაზე

Which products are the most demanded and vice-versa?

The practice of acquiring insurance varies quite a bit, and it is mainly derived from the client’s requirements set for the developer. Often times, when the customer is a foreign investor, the construction company is obligated to purchase insurance to protect from the major risks that we have already mentioned above. Unfortunately, in case of Georgian developer companies, the demand for insurance is ambiguous and limited. Typically, construction companies insure only specific equipment or only a part of the work. The least sought-after insurance package, unfortunately, is employer liability insurance. We hope that in the future, Georgian investors, developers and builders will share foreign standards and assess potential risks adequately.

ხალხი დადის ბეტონის კონსტრუქციაზე

I’m sure you deal with large-scale and formidable clients quite often, so in your opinion, what is the reasoning as to why they don’t insure their responsibilities?

The primary reason has to be a lack of information and experience. In this regard, we believe that insurance companies have a significant job to do. We need to demonstrate the importance and real costs of insurance to potential clients.

Author: Forbes Banker