A leap to a more resilient India
Swiss Re's preparatory work with India's authorities has resulted in an industry-first Inherent Defects Insurance policy, a product which is already helping the country build a more resilient infrastructure.
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Urbanisation and population expansion are two of the hallmarks of economic growth. India. As one of the fastest-growing economies in the world, the country sees millions of people relocating to cities every year in search of better jobs and lifestyle. Data shows that India will add 405 million to the global urban population between 2019 and 2050, more than 16% of the total addition worldwide.
India's rapid urbanisation calls for "higher" and "better" infrastructure to be built at an even faster speed, adding challenges to the already complex risk landscape. Difficult geological conditions, intricate construction methods, new technologies and sophisticated materials to save costs all complicate these multi-stage, multi-party construction projects.
Given these challenges, it's no wonder that hidden defects inevitably ﬁnd their way into any project, threatening the stability of the structure and safety of the people. In the event of structural damage – or worse still, collapse – it's very difficult to identify the negligent actor in the complex network involved in a construction project.
So who will help property owners repair and rebuild when such events occur?
In July 2020, the Institute of Chartered Accountants of India became the first beneficiary in India of Inherent Defects Insurance, also known as Decennial Latent Defect Liability Insurance in the local market. Offered by Oriental Insurance with Swiss Re as the reinsurer, this product is an industry first in India.
Following the construction of their training centre in Delhi, the transaction will cover the Institute of Chartered Accountants of India for up to 10 years. It protects the institute from any design, specification, workmanship, material or geological investigation defects, which might threaten the building's structural integrity or cause it to collapse. It will also proactively help improve construction quality right from the beginning, because regular engineer-led inspections during the construction phase is a prerequisite of policy purchasing.
In 2016, the Indian Government put into effect the RERA (Real Estate Regulatory Act) in various states. The law brought several aspects of real estate transactions under state regulation, making the builder liable for latent structural defects for a period of five years. For the past four years, Swiss Re has worked together with India's Ministry of Urban Development and Housing as well as Real Estate and Insurance Regulators to obtain the regulatory approval for the Inherent Defects Insurance policy. Now the solution will benefit a myriad of developers and property owners, contributing to a more resilient future in India.