Construction Project Risks in Balikpapan and East Kalimantan — Why CAR/EAR Insurance is So Important

Balikpapan, the Center for Strategic Infrastructure Projects in East Kalimantan

Balikpapan has long been known as an oil and energy hub, but its image is now rapidly changing to become the center of the largest infrastructure project in eastern Indonesia. The construction of the Indonesian Capital City (IKN) in North Penajam Paser Regency has made Balikpapan a key logistics hub and operational base for national and local contractors.

Kariangau Port, Sultan Aji Muhammad Sulaiman Sepinggan Airport, and the Kariangau industrial area are now traffic points for materials and heavy equipment from all over Indonesia.

Behind this economic activity, there are hundreds of active projects: the construction of the Balikpapan-IKN toll road, an LNG terminal, a gas and steam power plant (PLTGU), a housing complex, and an EPC (Engineering, Procurement, Construction) project for the installation of high-voltage electricity networks.

Every project has high risks, both technically, financially and operationally.

In this context, PT. Liberty and General Insurance Broker (L&G) play a strategic role. As a professional and independent insurance broker, L&G helps contractors assess, manage, and transfer risk to insurance companies in an efficient and measurable manner. Through digital technology, L&G is able to provide full service without distance limitations, reaching entrepreneurs in Balikpapan, Samarinda, and even remote areas of East Kalimantan.

Risk Dynamics in Construction Projects in Balikpapan and its Surrounding Areas

Construction activities in East Kalimantan face significant challenges. The region experiences high rainfall, unstable terrain, and limited logistical access in some remote areas. This combination of factors often creates risks:

1. Physical damage to the project: due to flooding, landslides, fires in the work area, or human error.
2. Construction equipment damage: such as cranes collapsing, excavators breaking down, or heavy materials falling during lifting.
3. Worker and third party injuries: legal risks that can result in claims for compensation.
4. Project delays: due to extreme weather factors or disruptions in material supply.
5. Transportation accidents: especially on projects in remote locations that rely on barges and heavy trucks.
6. Losses from a single incident can reach billions of rupiah, and without insurance coverage, the project could come to a complete halt.

Local Case Study: The Kariangau Wharf Project Incident and Its Financial Impact

For example, in late 2023, a major storm off the coast of Balikpapan caused extensive damage to steel materials and equipment for the Kariangau Pier project. A mobile crane toppled, while structural materials awaiting installation were washed away by seawater. Total losses were estimated at over IDR 8 billion.

Unfortunately, the project was not yet covered by a Contractor’s All Risks (CAR) policy because the contractor delayed purchasing the policy for cost-effective reasons. As a result, the contractor had to cover all the losses himself, delaying the project by nearly two months.

Cases like this are a valuable lesson that insurance is not an additional cost, but rather a business saving instrument.

What is CAR/EAR Insurance and Why is it Needed?

Contractor’s All Risks (CAR) and Erection All Risks (EAR) are types of project insurance designed to cover physical losses during the execution of construction work or installation of machinery and equipment.

This policy is usually divided into two main parts:

Section I – Material Damage:

Covers loss or physical damage to construction work, equipment, and materials due to sudden and unforeseen accidents, such as fire, explosion, storm, flood, landslide, or human error.

Section II – Third Party Liability (TPL):

Guarantees legal liability to third parties who suffer bodily injury, death, or property damage due to project activities.

CAR/EAR policies can also be extended to cover:

1. Earthquakes, storms, floods, and seawater damage.
2. Cost of clearing debris.
3. Professional fees (architects, engineers).
4. Maintenance period after project completion.

Without these guarantees, one small accident could have a domino effect on the contractor — from lost capital, to contract penalties, to a damaged reputation.

Real Case Example: Crane Collapse at IKN Project

In mid-2024, a tower crane collapsed during one of the IKN office building projects due to strong winds. This incident damaged part of the structure under construction. Fortunately, the implementing contractor already had a CAR policy with extended storm and flood coverage.

The insurance company then covered the repair and replacement costs of the equipment, amounting to over Rp 12 billion. The claim process went smoothly because the policy was prepared with the assistance of L&G Insurance Broker, who had previously conducted a risk survey and ensured that the high wind clause was included.

This is a real-life example of how a competent broker can save a project from potential major losses.

The Strategic Role of Insurance Brokers: Advisors, Not Policy Sellers

Many contractors in Balikpapan still believe that buying insurance directly from an insurance company is faster and cheaper. However, without risk analysis expertise, they may purchase inappropriate policies or policies with gaps that are only discovered when a claim arises.

As an independent insurance broker, PT. Liberty and General Insurance Broker (L&G) acts as a professional risk advisor working on behalf of clients, not insurance companies.

L&G’s main roles include:

1. Conduct project risk identification and evaluation before the policy is issued.
2. Prepare a guarantee design (policy wording) according to the character of the project and work contract.
3. Negotiating the best premiums with maximum guarantees to various insurance companies.
4. Provide assistance during claims to ensure the process runs quickly and the results are optimal.

With a professional approach, clients not only get an insurance policy, but also a comprehensive risk management strategy.

CAR/EAR Insurance as a Condition of Tender and Contract Compliance

Many large government, state-owned enterprise, and private projects in East Kalimantan — including oil and gas, power plants, and road infrastructure projects — require CAR/EAR and TPL policies as contractual prerequisites.

Without an Insurance Certificate document, tender participants may be disqualified.

Brokers like L&G have extensive experience handling tender documents in accordance with international contractual standards such as FIDIC, EPC, or Public Works Contracts. L&G can assist in preparing certificates of insurance, summaries of cover, and endorsements recognized by the employer, while ensuring all parties (owner, main contractor, and subcontractors) are properly covered.

Digitalization of Services: Modern Brokerage Without Distance Limits

Through digital innovation, L&G Insurance Broker is now able to serve clients wherever they are.

All processes can be done online, starting from:

1. Filling out the online proposal form,
2. Project document-based risk analysis,
3. Digital policy consultation and issuance,
4. Up to reporting and monitoring claims via the online dashboard.

This is very helpful for contractors in the East Kutai, Berau, or North Penajam Paser areas, who are often hampered by distance from the city center.

With this system, professional broker services can be accessed as quickly as opening a mobile phone.

Long-Term Benefits for Construction Entrepreneurs

Project insurance is not just a short-term safeguard, but part of a sustainable business strategy.

Contractors who are disciplined in risk management have a better reputation in the eyes of project owners, banks and financing institutions.

Additionally, a comprehensive insurance policy can:

1. Increase credibility when participating in tenders.
2. Becoming evidence of good risk management (good corporate governance).
3. Protecting company cash flow and assets from financial shocks.
4. Accelerate project recovery in the event of a major incident.
5. In other words, insurance is an investment that ensures business continuity.

Conclusion 

Construction is a high-risk business with tight profit margins. A single accident can wipe out annual profits or even lead to bankruptcy.

CAR/EAR insurance provides a crucial safety net to maintain project stability, reputation, and the trust of the job owner.

As a national insurance broker with over two decades of experience, PT. Liberty and General Insurance Broker (L&G) has become a trusted partner for many contractors in East Kalimantan, including in Balikpapan, Samarinda, and Penajam Pasuruan.

With a combination of technical expertise, a global network, and information technology support, L&G is ready to help every contractor face project risks with peace of mind.

Because protecting your project means protecting the future of your business.

📞Contact L&G Insurance Broker today for a free consultation and review of your project policy.

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

Website: lngrisk.co.id

Email: halo@lngrisk.co.id