Corporate Insurance Partner - Individual risk solutions for liquidated damages for delay and performance

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Rule Engine - Munich Re

Risk solutions for liquidated damages for delay and performance

Many project risks beyond the control of the contractor can result in substantial liquidated damages. Now you can hedge them.

In engineering, liquidated damages are frequently laid down for failure to comply with agreed technical specifications or delayed commissioning. In the course of a financial year, they can mount up to a substantial sum that cannot be budgeted for in advance. Whilst it is the contractor's job to build within the agreed timelines and to the agreed performance requirements, it faces many project risks that are beyond its control.

Example of delay

If a project suffers major delays due to an important component being lost or damaged due to the failure of key suppliers, the company is likely to incur substantial liquidated damages.

Example of performance

Faults in the design can result in the guaranteed performance not being achieved. If the faults cannot be remedied prior to the final acceptance of the equipment, heavy liquidated damages for underperformance may be payable by the manufacturer.

Our coverage models protect you against heavy liquidated damages that might pose a threat to your solvency. We work with you to analyse your projects and liability to pay liquidated damages, identify the most dangerous sources of risk and design cover to limit your risk.

Projects are not insured individually – cover is provided for the liabilities of all projects for each financial year.

The cover operates on an all risks basis

Examples of significant risks are:

  • Errors and omissions
  • Failure of key suppliers
  • Extreme weather conditions
  • Faults in design
  • Defects in materials
  • Bad workmanship

Engineering companies often have to take on project risks for which standard insurance product covers are not suitable. For this reason, innovative and above all flexible risk solutions that go beyond what traditional products can offer are now more than ever in demand.

The advantages of our tailor-made risk solutions at a glance:

  • We cushion your technical project risks so you can stay in business even in the event of a major loss
  • Using our solutions, you can reduce your reserves for possible liquidated damages or guarantee payments
  • The contractual liabilities arising out of your projects always form the basis of our coverage models. And in addition, transferring part of the technological risk to Munich Re Group provides you with good arguments for banks and investors, enabling you to lower your capital costs and optimise your liquidity

Our risk solutions – Growth with security
Our models provide you with more certainty for your planning, giving you more scope for growing with a dynamic market. Dangerous scenarios for projects and companies are covered, and you can still meet your financial obligations if things do not go according to plan. We look forward to working with you.

Please contact us to discuss your specific situation. We look forward to speaking with you about a solution that is tailored to you.

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This publication is available exclusively to Munich Re clients. Please contact your Client Manager.