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Insurers threaten to stop covering big tunnelling projects

PROJECT INSURERS warned last month they will stop covering major British tunnelling projects if there is another major collapse in the next few years.

'Tunnelling is the biggest loss maker the insurance market has got, ' Swiss Re's engineering underwriter Mike Brown said at New Civil Engineer's Megatunnels conference in London in May.

'Insurance is a privilege, not a right. Over the last 10 years we've paid out at least 10 times as much in tunnelling claims as we've received in premiums.

'There are already big re-insurers who won't go near tunnels - and some big overseas projects are already operating without any project cover at all.' Insurers are reeling from a string of UK collapses over the last 15 years, notably the 1994 Heathrow Express failure which reputedly cost £250M to put right.

Other collapses include the 1999 Hull tunnel and the 1998 Docklands Light Railway tunnel blow-out in London (GE April 1998).

Recovering the 150m of damaged tunnel that collapsed in Hull in 1999 involved ground freezing and a total bill 'which exceeded the project's £70M budget price', Brown said (GE December 1999).

Brown's concerns were backed by former British Tunnelling Society (BTS) chairman and Amec tunnel contracts director Peter South.

South said: 'This is a very, very serious problem. It now costs as much to insure a tunnel boring machine (TBM) as to buy one. Insurers are already demanding much higher excesses, and adequate cover is very hard to get.

'Most are also reluctant to cover unforeseen ground conditions, and policies have more and more exclusion clauses.' Amec is due to be formally confi rmed as the concessionaire for the £150M Docklands Light Railway Woolwich Arsenal extension shortly.

The project involves two new tunnels under the Thames. South confirmed project insurance restrictions could lead to the concessionaire carrying more risk than usual.

He added: 'In future contractors can expect only small increments over actual tunnelling costs. If it costs £10,000/metre to construct a tunnel and 50m collapses, all you will get is about £750,000 to reinstate it.' Those that do get cover will generally be project teams using the Association of British Insurers/BTS code of practice. This encourages clients, contractors and insurers to sit down together early and adopt modern risk management techniques.

Brown said this had been very successful, but not all tunnel projects had adopted it. 'The code is very difficult to follow on fixed price contracts, and it's not compatible with private finance initiative projects.

Insurers are also becoming sensitive to the expertise of the project team, South said. 'Experience on modern very sophisticated TBMs is hard to fi nd. Insurers want to know exactly who you have on board - and who did the geotechnical report.'

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