What a construction all risks policy covers
Construction and erection risk insurance (in Russian, SMR) is a comprehensive contract for the entire period of construction, reconstruction or installation. Internationally it is known as CAR (Contractors' All Risks) for construction and EAR (Erection All Risks) for equipment installation. The policy usually has several sections:
- Material damage — destruction of or damage to the works, building materials and structures, equipment being installed, temporary structures. Most often on an all-risks basis: fire, natural disasters, collapse, flooding, workmanship errors, theft and vandalism.
- Construction plant and machinery — cranes, excavators, site cabins, formwork (may be added as an option).
- Third-party liability — harm to the life, health and property of neighbours, passers-by and utility owners in the work zone.
- Additional costs — debris removal after a loss, urgent work, overtime.
- Commissioning and testing and the maintenance period after handover.
The owner's financial risk from delayed start-up (ALOP/DSU) can be insured separately; in Russia only a limited number of insurers offer it.
Who needs it
- Developers and technical clients — to protect their project and investment.
- General contractors and subcontractors — until the works are accepted, the risk of accidental loss generally lies with the contractor (Article 705 of the Civil Code).
- Installation companies — when installing expensive equipment.
- Banks and investors financing construction — as a condition of financing.
The law, public procurement and SROs
Civil Code. Article 742 provides that a construction contract may oblige the party bearing the risk of accidental loss of the works, materials and equipment to insure those risks, as well as liability for harm to others. The contractor may choose the insurer unless the contract says otherwise, but the client may require proof.
44-FZ and 223-FZ (Russia's public and state-company procurement laws). In draft contracts for construction and major repairs, customers often include an obligation for the contractor to insure construction risks and liability, with requirements for the sum insured, the beneficiary and the deadline for presenting the policy. Non-compliance may lead to contractual penalties.
The Town Planning Code and SROs. Liability for harm caused by destruction of or damage to buildings and breaches of safety requirements during construction is established by the Town Planning Code, and compensation is partly secured by the compensation funds of SROs (self-regulatory organisations). Many construction SROs additionally require members to insure their civil liability. A CAR policy with a liability section and an SRO member's liability policy are different contracts with different terms.
Sum insured and term
The sum insured for the works is usually the full estimated construction cost, including materials supplied by the client and possible price escalation. With under-insurance the payout will be proportional (Article 949 of the Civil Code). The contract term matches the scheduled works period; if construction is extended, the contract must be extended in advance — otherwise the project will be left uninsured.
What drives the price
- Type of project: residential building, industrial facility, bridge, tunnel, linear structures.
- Methods: excavations, work near existing buildings, dewatering, work at height.
- Location: seismic activity, flood risk, ground conditions.
- Estimated cost, duration of works, maintenance period.
- Contractor's experience, liability limit, deductible.
You can estimate the cost with the calculator; for large projects the insurer reviews the design documents, schedule and geology.
How to choose an insurer
- Check the Bank of Russia licence, experience in construction insurance and whether it has engineering underwriters.
- For large projects, ask about reinsurance protection.
- Check the wording against the contract and bank requirements before paying for the policy.
- Compare companies in the insurer directory.
Claims handling
- Make the site safe, stop the damage from spreading, call the relevant services.
- Notify the insurer within the time limit set by the contract; keep damaged structures until inspection if it is safe to do so.
- Collect as-built documentation, work logs, reports, photos and video.
- Agree the repair estimate with the insurer or loss adjuster.
Common mistakes
- The policy is not extended when the schedule slips.
- The sum insured does not include client-supplied materials and price escalation.
- The beneficiary does not meet the contract or bank requirements.
- There is no third-party liability section.
- Assuming damage from design or material defects is covered — usually only the consequences are covered, not the cost of rectifying the defect itself.
Related types: general liability, designers' liability, property after completion. To find suitable terms, submit a request to Polis Re specialists.
