Liga Asuransi – Great readers, how are you? Let’s continue our discussion about the types of insurance policies required by employment contracts in the Oil and Gas industry, both those held by PERTAMINA and by other profit-sharing contractors.
As we all know that oil and gas exploitation in Indonesia is monitored and managed through an agency established by the Indonesian government.
For this reason, the government has established a Special Task Force for Upstream Oil and Gas Business Activities (abbreviated: SKK Migas) which is an institution established by the Government of the Republic of Indonesia through Presidential Regulation (Perpres) Number 9 of 2013 concerning Management of Upstream Oil and Gas Business Activities. .
The establishment of this institution is intended so that the extraction of state-owned oil and natural gas natural resources can provide maximum benefits and revenues for the state for the greatest prosperity of the people.
SKK MIGAS already has special regulations and applies to every contract of work, procurement and consulting services in the MIGAS environment that must be fulfilled.
Especially for guarantees and insurance in every contract, it can be ensured that there is an article of guarantee and insurance or an article of insurance that must be fulfilled by every contractor or supplier.
If the contractor or supplier is unable to meet the insurance requirements, this can have an impact on payments.
Because of the importance of guarantees and insurance for every contract within SKK MIGAS, as a broker and insurance consultant with more than 30 years of experience in handling insurance needs in the MIGAS environment, we would like to take this opportunity to share our experiences.
If you are interested in this article, please share it with your friends so that they also understand like you.
Before we discuss the types of insurance required by SKK MIGAS contracts, it should be noted that usually in the contract there is already a risk sharing between the project owner (profit sharing contractor) and the implementing contractor.
Usually there is an explanation of insurance arranged by the employer (insurance to be arranged by the owner). Usually for drilling risk insurance coverage, construction and engineering and others.
Meanwhile insurance and risks that must be guaranteed by contractors or insurance to be arranged by contractors are explained in detail.
The following types of guarantees (guarantees) and insurance (insurance) are usually required in the SKK MIGAS contract:
A. Guarantee (guarantee)
- Bid Bond (Tender Guarantee)
This guarantee is required as a requirement in participating in the tender. If the contractor fails to provide the Bid Bond, it can be disqualified. Even if the Bid Bond is wrong and does not comply with the provisions it can also cancel the tender.
Bid Bonds can be issued by banks or by insurance companies (Surety Bonds). This needs to be ensured at the time of the tender explanation so that it is not wrong.
- Performance Bond (Performance Guarantee)
Performance Bond is required for the winning bidder. As a guarantee to ensure the winning contractor carries out his contract. If it fails, then the guarantee can be found.
This guarantee can be issued by a bank or by an insurance company.
B. Insurance (insurance)
Usually in the contract regarding insurance, there are two parts, the first is the insurance provided by the COMPANY (owner) and the insurance provided by the CONTRACTOR.
Insurance that has been provided by insurance such as Construction Erection All Risks, Builder Risks, Drilling Risks and others.
The insurances that are the obligations of the CONTRACTOR include the following:
- Comprehensive General Liability (CGL)
CGL is legal liability insurance against third parties. The CGL insurance policy covers or compensates for claims from third parties (neighbors, guests, the project’s surroundings) who suffer damage and loss due to accidents that occur on the project.
Usually the CGL insurance policy consists of 3 guarantees, including:
a. Public Liability (responsibility to third parties)
due to bodily injury, illness, death and property damage.
b. Employer’s Liability
Employer’s Liability is the legal responsibility of the employer (employer) for claims filed by workers for accidents, injuries, disability and death caused by the fault and negligence of the employer (employer).
For example, a worker suffered a head injury and concussion because his head was known to be iron, even though he was already wearing a helmet. After being investigated, it turned out that the helmet provided by the employer was not a helmet that complied with the standards, as a result, the helmet could not protect the worker’s head.
c. Workmen’s Compensation Assurance (WCA)
WCA provides compensation in the form of cash to workers as a result of work related injuries.
Previously, the calculation of compensation was based on PERTAMINA BENEFITS. PERTAMINA BENEFITS is a compensation standard that has been adopted by the insurance industry for a long time. One of the benefits provided is a death benefit of 72 times the salary.
But now there is another alternative, namely BPJS Employment (Employment Social Security Administering Agency). In terms of benefits, it is still lower, but because this is a mandatory program, it is enough for many employers to have BPJS Employment guarantees.
d. Automobile Liability
Automobile liability is a guarantee of legal liability as a result of accidents caused by the use of vehicles on public roads.
This guarantee is often also referred to as Legal Liability (TJH) in Motor Vehicle insurance.
This guarantee is only required if a special vehicle for this project is used to carry out the work. For example the use of pick ups, mini buses and other vehicles.
However, if the project does not require a special vehicle then this guarantee is irrelevant.
- Property or Commercial All Risks
If the work requires the contractor’s equipment to be brought to the project site, the contract usually includes a requirement to insure these items.
Many may ask why SKK MIGAS requires this, even though it is the property of the contractor? To ensure that the project can run smoothly even if there is an accident and loss of the contractor’s belongings.
If insured then they can get reimbursed from the insurance company and there is no reason to delay work.
- Equipment Insurance – Land Rig Insurance
If the project uses construction equipment and rigs, then SKK MIGAS also requires that all equipment be insured.
Why? Because if there is an accident that causes damage to the tool, it can be replaced by insurance. Thus it can be ensured that the contractor will be able to complete the project.
- Marine Hull Insurance
If the project is carried out using a ship, it is required that the ship used is insured with Marine Hull and Machinery insurance.
- Protection and Indemnity (P&I)
In addition to marine work (at sea), SKK MIGAS also requires that ships are also equipped with P&I guarantees.
P&I is a guarantee for the ship’s liability to third parties such as collisions with other ships, crashing into ports, lifting of ship debris, crew accidents and pollution.
- Aviation Insurance
If the job involves an airplane, the airplane needs to be insured.
- Professional Indemnity (PI)
Several SKK MIGAS contracts also require contractors, suppliers or consultants to also provide a Professional Indemnity (PI) insurance policy.
PI is a guarantee for the expertise of the personnel and companies that carry out the work where if these experts fail to do their work, it will cause damage and project failure.
How do I get the above insurance coverage?
Frankly, it is not easy to get insurance coverage for this SKK MIGAS project. Special expertise is required in understanding risk, policy content and selecting an insurance company.
Because oil and gas risk is included in the high risk category, not many insurance companies have insurance coverage.
Of the approximately 70 general insurance companies in Indonesia, only about 10 have oil and gas insurance products. Of the ten, only a few can provide the most competitive guarantees and premium fees.
Why should you use the services of an Insurance Broker?
Insurance brokers are certified insurance experts recognized by OKJ and BNSP. Insurance brokers are on your side. They help understand insurance needs as required by the contract and then adjust it according to the scope of work.
Insurance brokers design a suitable insurance program then seek support from insurance companies and at the same time negotiate the most competitive premium costs.
The insurance broker’s most important job is to assist with the settlement of claims if they occur, from the moment of occurrence to payment.
One of the insurance broker companies with extensive experience in the oil and gas sector is L&G Insurance Broker.
For all your insurance needs, contact L&G now!
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