International Legal Perspective | A Study of Legal Issues Concerning Construction All Risks Insurance under the FIDIC Contract System
Published:
2025-04-01
International engineering projects typically adopt FIDIC (International Federation of Consulting Engineers) standard contracts, while Contractors' All Risks (CAR) insurance is a core tool for international project risk management. However, due to differences in insurance legal systems, judicial practices, and market conventions in various countries, the practical application of CAR often faces ambiguities in liability definition and difficulties in claims. For example, a 2021 Lloyd's market report shows that approximately 40% of disputes in international engineering insurance claims involve conflicts in the interpretation of insurance clauses under FIDIC contracts. This article analyzes typical international engineering Cases to explore the applicability of CAR under the FIDIC system and proposes optimization suggestions to help project participants better manage risks.
International engineering projects typically adopt FIDIC (International Federation of Consulting Engineers) standard contracts, while Contractors' All Risks (CAR) insurance is a core tool for international project risk management. However, due to differences in insurance legal systems, judicial practices, and market conventions across countries, CAR often faces challenges in practice, such as ambiguous liability definitions and difficulties in claims. For example, a 2021 Lloyd's market report shows that approximately 40% of disputes in international engineering insurance claims involve conflicts in the interpretation of insurance clauses under FIDIC contracts. This article analyzes typical international engineering cases to explore the applicability of CAR under the FIDIC system and proposes optimization suggestions to help project participants better manage risks.
I. Basic Framework of Contractors' All Risks Insurance under the FIDIC Contract System
Article 18 of FIDIC contracts (such as the 2017 Silver Book and Red Book) clearly stipulates the basic requirements for project insurance, including the following:
However, FIDIC's insurance clauses are usually rather general, while the specific policy content is subject to the insurance company's standard clauses, which may lead to a gap between the contractual agreement and the actual insurance coverage.
II. Risk Allocation Framework under the FIDIC Contract System
(A) Risks Borne by the Employer
Under the FIDIC contract system, the employer mainly bears two core types of risks: force majeure (FIDIC 2017 Article 18.6) and changes in law (Article 13.6).
(B) Risks Borne by the Contractor
FIDIC contracts clearly allocate the responsibility for construction quality and third-party damage risks to the contractor.
(C) Jointly Borne Risks
FIDIC contracts adopt the principle of conditional joint responsibility for the allocation of natural disaster risks, the core of which lies in whether the "unforeseeability" standard is met.
III. Case Analysis of CAR Disputes in International Engineering Projects
IV. Legal Conflicts of CAR in Different Jurisdictions
V. Suggestions for Optimizing CAR Insurance and Claims Strategies
VI. Summary
Contractors' All Risks insurance under FIDIC contracts is the core of international engineering risk management, but its applicability is subject to legal conflicts and differences in clause interpretation. Contractors' All Risks insurance under the FIDIC system exhibits a hierarchy of effectiveness: "contractual agreement > policy clauses > domestic law." It is recommended to eliminate legal conflicts through "localized appendices to insurance clauses" and to utilize cross-border reinsurance to diversify catastrophic risks.
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