Evaluation of insurance policies in the Saudi Arabian construction contracts

Abstract

The construction sector is more complicated and prone to risk than many other industries due to the size of the projects and the financial capital involved. Arranging insurance is the prudent course of action for risk management in the construction sector. There is a lack of clarity in insurance policies for public construction projects in the Kingdom of Saudi Arabia (KSA), which poses additional risks to all involved contracting parties. The aim of this research is to evaluate insurance policies in the KSA's public construction projects to identify the key deficiencies and obstacles and provide a road map for improvement in the insurance sector concerning insurance against financial losses, professional liability, defects' liability, hidden defects, and others. Forty-two contractors and forty-two owners in Saudi Arabia were surveyed, using a questionnaire to gather information for the study about their knowledge of and attitudes regarding risk transfer through insurance (professional liability, defects liability, and hidden defects). The study also covers the selection criteria for insurance policies for projects that potentially shift risk to the construction sector. Ten criteria were also examined as potential sources of liability issues and suggested as potential remedies in KSA. The findings indicate that the duty and liability of engineers and those participating in these projects can be offset by engineers' insurance against professional errors and hidden flaws, and by the construction industry's clear liability policy. Additionally, the research is envisaged to contribute to construction projects' overall quality and safety, ensuring that robust legal and financial safeguards protect all stakeholders.