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Tunnelling faces crisis as insurers threaten to pull cover


PROJECT INSURERS warned this week that they would stop covering major British tunnelling projects if there is another £200M collapse in the next few years.

'Tunnelling is the biggest loss maker the insurance market has got, ' Swiss Re's Mike Brown told the audience at NCE's Mega- tunnels conference in London last week.

'Insurance is a privilege, not a right. Over the past 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 reinsurers who won't go near tunnels - and some big overseas projects are operating without project cover at all.' Insurers are reeling from a string of collapses over the past 15 years, notably the 1994 Heathrow Express failure which reputedly cost £250M to put right.

Other incidents include the 1999 Hull tunnel collapse and the 1998 Docklands Light Railway tunnel blow out (NCE 22 January 2004).

Recovering the 150m of damaged tunnel in Hull involved ground freezing and a total bill 'which exceeded the project's £70M budget price', said Brown (NCE 18 November 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 serious problem. It now costs as much to insure a tunnel boring machine (TBM) as to buy one.

Insurers are 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 shortly to be formally confi ed as the concessionaire for the £150M Docklands Light Railway Woolwich Arsenal extension.

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

Brown warned: 'In the future contractors can expect only small increments over actual tunnelling costs. So if it costs them £10,000/m to construct a tunnel and 50m collapses, all they will get is £750,000 to reinstate it.' surers and contractors concerns come despite the fact that the Channel Tunnel Rail Link has recently completed 40km of tunnel under London.

Client Union Railways managing director Alan Dyke has claimed this success 'has shown that constructing large diameter tunnels . . . can be done predictably, safely and at an affordable cost.' (NCE 28 April) Those projects that will get cover will generally be those project teams using the joint 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.

'But the code is very difficult to follow on fixed price contracts, and is not compatible with private finance initiative projects. But there are some general principles any contractor can follow if it is looking for cover, ' he said (see box).

Insurers are also becoming sensitive to the expertise of the project team, South said.

'Experience on modern very sophisticated TBMs is hard to fi d. Insurers want to know exactly who you have on board - and who did the geotechnical report.'

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