Management Of Construction Project Risk And Research On Engineering Insurance

Management of construction project risk is a process of identification, evaluation, prevention and controlling on potential risk. Risk of construction project exists objectively. Generally speaking, construction project possesses characteristics such as big investment, long construction period, complicated public relations and quite a few uncontrollable factors. Potential risk existed during the course of contracting will bring potential loss to parties involved. Uncertain factors existed in the process of construction have greater risk than production of common goods, so it is very important to carry out risk management. Risk management is an active controlling on the target of project. At first we should identify project risk, then quantitative analysis on the risk and controlling it. Risk management is internationally regarded as part of project management, which is on the basis of risk management and target controlling. Risk transfer is the most frequently adopted measure in engineering risk management with a common way of engineering insurance. Risk management, as a powerful tool for evaluating and carrying out project management successfully, is a key factor for avoiding and reducing unforeseeable risk. With China's entering into WTO and deepening economic reform, under the new situation of construction market with more complicated investment environment and fierce competition, theoretical research and practical utilization of engineering insurance is becoming more and more important as a common and effective means of risk management. Engineering insurance is a commercial insurance that the policyholder pays premium to the insurer according to insurance policy meanwhile the insurer shall indemnify the policyholder for property loss incurred on insured items or the insurer shall be liable for indemnity when the insured suffers death, disability or disease. Those types of insurance related to construction project are construction engineering all risks, installation engineering all risks, personal casualty risks, professional liability risks, 10 year or 2 year liability risks, motor vehicle risks, etc. Engineering insurance is so far one of the most common and effective risk management means for construction project for the purpose of diminishing loss incurred or relevant disputes, clearing obstacles and pursuing smooth accomplishment by defining risks during the course of construction project as insured object. Despite paying premium for engineering insurance service, the policyholder will control more efficiently on damages and losses so as to ensure the project can be carried out successfully meanwhile reduce the total expenses. Features of engineering insurance: (1) Complexity of risks. From the beginning to the completion of the construction project, there will be risks in many ways related to not only project itself but also relevant objectives, demanding high specialty and expertise with much advanced science and technology involved, which make it very complicated. (2) Many-sided policyholders. Generally more than one interest party involved in a construction project, such as project owner, project undertaker, technical consultant and banks granting loan. (3) Uncertainty of insured period. Usually the insured period of construction project is not calculated on yearly basis but according to estimated working days, i.e. from the beginning date till the acceptance date. (4) Comprehension liability. Insurance against construction project includes not only direct property loss but also third party liability risks on which the insurer shall indemnify casualty and damage incurred in or near the construction site caused by accidents during the insured period. (5) Huge insured amount. The insured amount can be in a level of hundreds of millions RMB due to huge investment of construction project,especially for those with high tech and precision equipment involved. According to insurance law and international common practice, insurances related to construction project can be classified into 2 categories, compulsory insurance and voluntary insurance. The main objects of this thesis are: firstly how to analyze construction project risk; secondly how to evade construction project risk; thirdly how to transfer construction project risk by means of insurance. Through research on relevant theory of construction project risk management and insurance, it provide involved parties with decision-making support on controlling risk effectively at limited cost so as to achieve the goal of the project. On the basis of analyzing theory of risk management both home and abroad, in view of practical situation of construction project, the thesis summarizes identification technique for construction project, establishes mathematic model on risk evaluation on construction project and puts forward appraisal method on construction project risk. Through analysis of risk countermeasures which have advantages and limitations, the thesis points out that a comprehensive strategy for risk evasion should be adopted. Insurance is an effective way of transferring uncertain risk of construction project into a fixed amount of expenses. An insurance strategy is provided after synthetic appraisal on economic factors of construction project insurance. By integrating theoretical study with practical case of construction project, the thesis comes up with strategy for insurance and risk management through identification and qualitative & quantitative analysis and synthetic evaluation on risk of construction project. Inquiring into engineering insurance for construction project risk management is a comparatively new subject, so the writer adopts advanced and practical method during the course of thesis writing. Engineering insurance is an effective means of transferring risk to ensure the fulfillment of construction project. The writer hopes that thethesis can provide relevant parties with method of insurance and risk management for reference. Regarding problems emerged recently in real estate market, especially for residence buildings related to common people, it is essential proceeding insurance for building quality assurance. Although many developers recognize the importance of sincerity and honest, to avoid disputes building quality assurance is an inevitable trend. In conclusion, widely realization of risk management system in China requires advancing step by step. At present we should strengthen policy guidance and propaganda, improve laws and regulations, cultivate competent market for guarantor and insurance consultancy, based on which a system of construction engineering risk management with Chinese characteristics can be eventually built up. Limited by the writer's knowledge and experience, those strategies concerned with insurance and risk evasion are to be improved so the writer sincerely welcomes comments from teachers.