Construction Risk Management through Insurance in the Ethiopian Federal Road Projects

Abstract

Risk management is now widely accepted as a vital tool in the management of projects. If one cannot control a risk through a business practice or transfer that risk to someone else through an indemnification clause, then he should manage that risk through insurance. However, there has been no in depth analysis of the practices of construction risk management through insurance in the Ethiopian road projects. Therefore, the objective of this study was to conduct an assessment of construction risk management practices through insurance and to address this gap and contribute to the knowledge base of construction risk management in Ethiopia.Through detail literature review major risk factors and insurance policies were identified in the construction industry and through questionnaire survey these factors then ranked in terms of the importance of the factors for each of the parties involved in road projects, using relative importance index. Kendall’s coefficient of concordance was used to measure the degree of agreement of the rank correlation between the respondents. The study revealed that delay in payment to contractor for work done is ranked first important risk, injury to property is rated first as most important insurable risk and bid bond is ranked first as most used insurance policy in the Ethiopian road sector.

Keywords:Client, Consultant, Contractor, Insurance, Insurability, Liability, Risk Management and Road Construction