The x% factor in Incidental Wet Risks as prescribed in the Engineering Proportional

Yesterday’s negotiation seeking the amendments of the “Wet Risks” exclusion wordings draw a flak with the lead reinsurers not giving way…. My intention was basically to get them to agree to the characteristics of wet risks which I have outlined in my blog of date 29 August 2009 – reiterating here in the following manner:


All “Wet Risks” are defined as follow and are deemed excluded from the treaty coverage:

  1. Risks attaching to a contract site and / or contract works that are partially or in whole submerged or in close proximity with a reasonable large body of water or environment, or with any part of its foundation / structure works having submerged in such environment, and
  2. The overall contract risks are as a direct result, predominantly and constantly exposed to (or under threat by) the forces of such  aqueous environment, eg. flooding, waves and under-currents.

(However, for bridges’ piers in river or sea, such exclusion shall not apply if the bridge is with span not exceeding 50 meters)

All contracts involving any major marine works are deemed to fall within the above definition.

The following contracts are deemed as marine works:

  • Harbour, Ports
  • Dock (maritime)
  • Wharf
  • Breakwaters, Caissons
  • Seawalls
  • Jetty, Quay
  • Pier
  • Water intake or outlet of power plants
  • River draining or regulating works
  • Channels
  • Dams

companydetails_3Once having agreed to the definition, the “Incidental Wet Risks” should be taken out completely. Reason being the x% of total contract value tagging to the incidental wet risks is too clear, too good for comfort. Thus the alternative is to go back to simple underwriting principles, that is to provide leeways for us to exercise good and prudent judgement in making decision concerning the usage of words: partially, close proximity, predominantly, constantly, any part and major, which I have underlined above.

Wet risks construction

Main reasons cited are:

  1. The industry is not ready for such x% of total contract value in respect of incidental wet risk to be taken off the treaty. The lead reinsurer must be seen to be industry compliant… least to both the cedants and the following markets,
  2. They are not comfortable in allowing the cedants to interpret the wordings (as underlined and prescribed above) as freely as can be.

Nevertheless after going through some questioning posted earlier on to both the broker and the reinsurer(s), the understanding of the said clause wordings certainly differs….. depicting the fact that we need to further strengthen on how we word our contractual documents. We cannot merely rely on just our “intention” – it is extremely flexi and fluid although it was good feeling to think such is best practice. The contract must parameterised those intention so that decisions or disputes can be adopted or resolved in the most efficient manner.

quoteSo, is the Infinity Tower Project a wet risk or is it a non-wet risk having the incidental wet elements < x% of tcv?

I would have felt they missed the point here….. all these prescribed wordings are easily interpreted and decided upon; not “can be freely” done as what they had envisaged! Anyway, it is back to square one – BACK TO DRAWING BOARD all over again…. they need the “incidental wet elements” to be around and closer to heart for comfort!

From Small Pond to Big Pond

From Small Pond to Big Pond

I can guess it right at this point in time….. when I was working in East Malaysia, I was a big fish in a small pond. Now back in Kuala Lumpur, I have to realise, I am just a small fish together with many small fishes trying to find our way in a very big pond! Well, does this actually cross your mind?

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6 comments for “The x% factor in Incidental Wet Risks as prescribed in the Engineering Proportional

  1. vijairagavan
    October 18, 2009 at 10:27

    What are the exclusions wording used for covering wetr risks to offer my comments?

  2. vkliew
    September 17, 2009 at 22:43

    I would have felt the Infinity Tower project is not a wet risk despite it being very near of closed proximity near the very large body of water. There was certainly no contact. But then it boils down to the wordings used.

    • September 17, 2009 at 23:36

      You are right to say it depends on the wordings stipulated in the exclusion clause!

      • vijairagavan
        October 18, 2009 at 10:28

        What are the wordings of the exclusion clause?

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