INSURANCES IN CONSTRUCTION SECTOR TO BE CHANGED
A new regulation for the insurances in the construction industry is being drafted by an expert team at the Ministry of Regional Development and Public Works (MRDPW). It will be made public in summer, after passing the amendments to the Organization of Territories Act (OTA). The law was promulgated in January 2001, despite the numerous queries on it. The amendments to the act should be ready by June.The major problems in insuring facilities under construction concern the mandatory insurances. According to the amended provisions of the OTA, they should include the period from the designing stage through construction and a guarantee period for all buildings. This means, insurers roughly pre-estimate, that an insurance for a total of 12 years is to be closed. There are several problems regarding such long-term commitments. Firstly, no reinsurer could be found for such a long period. Insureres are neither inclided to undertake protection against risks for such terms, as they cannot guarantee adequate management. Investors, on their part, can seldom afford to make such great expenses, as are required for long-term policies.Many big investment projects presently depend on the direction in which the insurance regime will be changed. The currently effective law has already created problems and even such large facilities as the Maritsa Iztok 2 power station could not be insured in compliance with the legal requirements, experts from leading insurance companies commented.The idea of companies (which is presently also discussed by a commission at the MRDPW, entrusted to prepare the amendments) is to close one-year insurances during the designing and construction stage of a certain facility. Insurances are to be closed as well during the 5-year guarantee period, which is mandatory for any new building.Another arguable problem in the commission of experts is the basis, on which the construction facilitities should be insured. One of the options is to use as a basis the building's market value, and the other one is to close the insurance on the basis of the actually invested funds.