Construction and Real Estate

The CEE Region has a higher number of construction projects happening than many developed western markets.

For example most CEE countries started in 1991 with no shopping centres, whereas the equivalent–sized western city had 20 such shopping centres. Today the CEE city may have built 10 such centres, but it will still build 10 more, whereas the western city may just build one more every now and then.

During the period 2009-2010 construction in CEE for commercial sites almost stopped due to the banking crisis, but construction of infra-structure projects that had long-term EU financing continued. Further east, construction markets have continued in strength, buoyed up by wealth generated from petrochemical and mineral extraction.

Now in 2013, construction on commercial projects has re-started and infra-structure projects continue, so overall CEE is a growing and busy construction insurance market.

Construction insurance risks in CEE

Pre-risks:

In CEE investors in construction and property development face some different risks, due in part to the relatively recent creation of legislation, especially land ownership rights. Careful investors look to buy the following insurance:

Political Risk Insurance – this insures primarily against confiscation of the investment by a government which remains a risk in the more emerging markets where Government still rules more independently of the law, e.g. Belarus.

Title Insurance – this insures against the Title of the investment proving to be weak or not valid, and again this is a risk especially in countries where land rights ownership are still only just being established , i.e. Albania.

MAI CEE places these types of insurances for its property development clients across CEE.

Operational Risks:
During the construction period there are several insurance risks to be covered as follows:

Constructors All Risk Insurance – the standard construction insurance includes the property damage, General Liability and equipment insurance – it can be bought by the constructor or the owner – we prefer our owner clients to buy it, as CEE constructors often buy limited conditions, or fail to pay premium instalments, so owner programmes give more control and safety all round.

Professional Indemnity Insurances – construction insurance can give some limited professional indemnity insurance coverage by adding in clauses, but architects, project managers and constructors should all buy Professional indemnity insurance, and in CEE they usally do not – we make sure it is bought or covered to protect our owner clients.

Financial Insurances – Constructors are usually required to buy Bond Insurance, and this is available in most CEE countries (though less so in Russia/CIS) so we provide it.

MAI CEE has built a strong real estate and construction practice working with companies and investors seeking to take advantage of the opportunities available within the CEE region from acquisitions, developments and infrastructure projects.

MAI CEE’s close contact with its country markets give us a unique ability to provide advice and support for clients investing in the region and cover their risk if sellers’ warranties are invalid.