There are many reasons why a yard needs insurance cover and the following by no means covers them all. To protect the yard against unforeseen incidents. The Rules covers the yard for “all risks” against physical loss or damage to the hull and machinery of vessels you are constructing (including materials in your possession allocated thereto) from a wide variety of causes. It also covers full collision liability up to hull value and third party liabilities.
By letting underwriters carry the burden of risk, the yard is able to concentrate on what it does best; building vessels. Therefore, monies that may have been set aside for contingencies, (and which may not be sufficient for a sudden catastrophic loss), can be used more effectively.
For example, damage caused by a crane, fire in a dry dock, or a accident during trials could amount to substantial losses to the yard. With the possible coincidence of physical damage to one or more vessels under construction, third party liabilities like loss of life (maybe of a visiting foreign surveyor) and the expense due to delay to the yards medium term newbuilding commitments, the final bill could be far in excess of the yard’s financial capabilities if it retains the risk.
So why to insure?
• Indeed it may be a contractual requirement for a loan that full insurance cover is in force.
• By purchasing insurance, the yard is buying financial stability against unexpected losses
• Insurance can be a valuable marketing tool giving the yard an edge to win the order.