Construction Boom in Batam: Why Should Every Project Be Covered by CAR/TPL Insurance?

The Project Boom in Batam and the Threats Behind It

Over the past decade, Batam has experienced a remarkable acceleration in development. The city has become not only an international industrial and logistics hub, but also a major construction hub in Indonesia. In areas such as Batam Center, Nongsa, Batu Ampar, and Tanjung Uncang, housing projects, ports, industrial estates, and energy facilities are underway on a massive scale.

However, behind this enthusiasm for development lies a significant risk that is often overlooked. Construction always carries uncertainties—from damage caused by extreme weather and workplace accidents to technical errors that can result in billions of rupiah in losses. A single incident can halt a project for months and disrupt a company’s cash flow.

Therefore, project insurance such as Construction All Risks (CAR) and Third Party Liability (TPL) is mandatory protection for every project in Batam, both private and government owned.

From the very beginning of project planning, insurance brokers play a vital role in helping contractors, developers, and investors understand risks, calculate coverage needs, and negotiate the best policies.

One of Indonesia’s leading brokers, L&G Insurance Broker, has decades of experience handling major projects throughout Indonesia, including Batam. L&G helps clients identify project risks and tailor insurance programs to meet their needs, budgets, and fieldwork schedules.

Common Risks in Construction Projects in Batam

Batam has unique geographic conditions—a tropical climate, surrounded by sea, and with strong winds during certain seasons. These conditions mean that construction projects in this region have a different risk profile than other areas. Here are the main risks to be aware of:

• Fire and explosion

Often occurs due to welding work, electrical short circuits, or flammable materials in the project area.

• Structural damage and technical failure

It could be caused by design errors, material failure, or implementation that does not meet specifications.

• Extreme storms and rain

Batam, which is located on the coast, is very vulnerable to sea storms which can damage scaffolding, cranes or temporary structures.

• Theft of materials and heavy equipment

Project locations that are open and often not guarded 24 hours a day are targets for theft.

• Work accident

Worker falls, being hit by falling materials, or injuries caused by heavy equipment are still the main causes of project delays.

• Third Party Liability

For example, local residents’ houses were damaged due to vibrations from construction, or public vehicles were hit by falling material from the project.

• Force majeure

Such as small earthquakes, storms, or local floods that damage physical work in the field.

All of these risks can occur without warning and have significant financial consequences. This is where risk transfer through project insurance becomes crucial.

Types of Insurance that Projects Must Have

To ensure the project runs smoothly and is protected from any potential losses, here are the main types of insurance that must be considered:

1. Construction All Risks (CAR) Insurance

Guarantee all physical risks to construction work during the project period.

Covers damage to buildings, materials, temporary equipment, and even loss due to violent theft.

This policy covers:

1. Damage due to accidents, fire, storms and floods.
2. Debris removal costs.
3. Architect and engineer fees for repairs (professional fees).

2. Third Party Liability (TPL) Insurance

Bear legal responsibility towards third parties who suffer losses or injuries due to project activities.

3. Workmen’s Compensation / Personal Accident

Protecting project workers from the risk of work accidents, including medical costs and compensation.

4. Contractor’s Plant and Machinery (CPM)

Guarantees heavy equipment such as excavators, cranes, and bulldozers from damage due to accidents, overturning, or fire at the project site.

5. Erection All Risks (EAR)

For complex machine, factory, or industrial equipment installation projects — widely used in power plant or energy infrastructure projects.

6. Surety Bond (Performance & Bid Bond)

Project implementation guarantee, especially for contractors participating in government or state-owned enterprise tenders.

Real Case Examples in Batam

Case 1: Formwork Collapse in a Building Project

A commercial building construction project in Batam Center experienced a collapse of concrete formwork due to scaffolding errors, causing losses of up to Rp 1.2 billion.

Fortunately, the project was covered by CAR insurance, and the claim was approved in full within 45 days. Work was able to proceed without significant disruption to the contractor’s cash flow.

Case 2: Project Road Damaged Due to Heavy Rain

A road construction project in the Batu Aji area was flooded for two weeks. Because the insurance policy didn’t cover force majeure, the contractor had to cover the estimated Rp 800 million in material losses.

This case is an important lesson that the selection of additional clauses (extension clauses) in a policy should not be ignored.

Project Insurance Premium Cost Estimate

The following is an estimated premium range based on project value and type of coverage:

💡Premiums can be more efficient when discussed through an insurance broker, who can tailor the coverage to the project’s actual risks and the client’s financial capacity.

The Role of Insurance Brokers in Construction Projects

Managing project insurance isn’t just about purchasing a policy. It requires a deep understanding of technical risks, contracts, and legal responsibilities. This is where an insurance broker adds significant value.

• Technical Risk Analysis

Brokers assess factors such as project location, type of work, soil conditions, and weather to determine the level of risk.

• Preparation of Underwriting Documents

This includes a project schedule, work plan, material values, and technical specifications. This document is essential for underwriters to accurately understand the risks.

• Negotiation and Policy Placement

Brokers connect clients with various trusted insurance companies to get the best rates, terms and clauses.

• Claims Assistance

In the event of a project accident, the broker acts as the client’s official representative in preparing loss reports and negotiating with the insurance company.

• Risk Audit and Periodic Review

Brokers help monitor project progress and adjust policies if there are changes in the value of the work or the project schedule.

L&G Insurance Broker’s Strategic Role for Projects in Batam

L&G Insurance Broker has handled hundreds of major projects in Indonesia, including the development of industrial estates, ports, and energy facilities in Batam.

Here are the advantages:

• 💼Experienced project risk consultant — understands the intricacies of construction contracts and tender requirements.
• ⚙️Technical team with engineering background — able to read working drawings and assess risks in the field.
• 📋Assistance from the tender stage — helping to prepare mandatory insurance documents such as insurance certificates or endorsements for project owners.
• ⚡Fast and transparent claims service — ensuring a smooth claims process and maximum results for contractors.
• 🤝Extensive network — working with large-capacity national and international insurance companies.

L&G also provides free pre-risk assessments for projects in Batam to help contractors understand their risk exposure before a policy is issued.

Important Additional Clauses in CAR/TPL Policies

For optimal protection, it is highly recommended to include these additional clauses in the policy:

1. Debris Removal Clause – covers the cost of post-incident debris removal.
2. Surrounding Property Clause – protects property surrounding the project that is damaged.
3. Professional Fees Clause – covers the costs of architects or engineers for repairs.
4. Cross Liability Clause – covers legal responsibilities between contractors/subcontractors.
5. Force Majeure Extension – extends protection against storms, earthquakes and floods.

An Insurance broker like L&G will ensure these important clauses are included from the outset, not after the fact.

Tips for Choosing Construction Project Insurance

1. Determine the project’s value accurately. Ensure all physical work, materials, and labor costs are covered.
2. Make sure all parties are listed in the policy, including the owner, main contractor, and subcontractors.
3. Use an OJK-licensed broker. This ensures legal security and professionalism.
4. Check the insurance company’s reputation. Choose one with experience handling project claims.
5. Review the policy before work begins. Many claims are denied because the policy was purchased after the project was underway.

Conclusion: Protect Your Construction Investment

Every construction project, large or small, carries unavoidable risks. Technical failures, workplace accidents, and natural disasters can bring a project to a screeching halt.

Without insurance coverage, the impact can be devastating — not just financial loss, but also reputation and client trust.

With the right CAR/TPL insurance and support from a professional insurance broker like L&G Insurance Broker, all major risks can be controlled.

L&G helps ensure your project stays on track, claims are processed quickly, and investments remain protected through to completion.

🟢Projects may be risky, but risks can be controlled.

Protect your project today — before risk takes over.

DON’T WASTE YOUR TIME AND SECURE YOUR FINANCES AND BUSINESS WITH THE RIGHT INSURANCE.

HOTLINE L&G 24 JAM: 0811-8507-773 (PHONE – WHATSAPP – SMS)

Website: lngrisk.co.id

Email: halo@lngrisk.co.id