Contractors All Risk Insurance for Kenyan Developers: Costs, Coverage, and Exclusions

1. Introduction: Why CAR Insurance Matters More Than Ever

Kenya’s construction landscape has never been more vibrant. From Nairobi’s mixed-use towers to expanding satellite towns like Athi River, Kitengela, Ruiru, and Ngong, developers are racing to meet rising demand for housing, retail, and industrial space. But behind every successful build lies a high-risk environment—one where heavy machinery, unpredictable weather, expensive materials, and human error constantly collide.

A single mishap can derail months of work. Steel meant for reinforcement might be stolen overnight. A collapsed trench could trigger liability claims from nearby property owners. A sudden fire can erase millions of shillings worth of progress.

That’s where Contractors All Risk Insurance in Kenya becomes indispensable. It acts as a financial safety net, shielding developers from losses that would otherwise stall or destroy a project. It protects not only the ongoing works but also public safety, equipment, materials, and your legal exposure.

For today’s developers, lenders, engineers, and contractors, CAR insurance is no longer optional—it’s a strategic necessity.

2. What Is Contractors All Risk (CAR) Insurance?

Contractors All Risk Insurance is a comprehensive policy that protects a construction project from accidental physical damage and covers the legal liabilities arising during the building process.

It offers two core protections:

A. Material Damage (Contract Works Cover)

This covers physical loss or damage to:

• Buildings under construction
• Temporary structures (scaffolding, formwork)
• Stored materials
• Plant and equipment
• On-site tools
• Debris removal
• Professional fees
• Damage from fire, explosions, storms, floods, or accidental human errors

B. Third-Party Liability

This protects you when construction activities damage:

• Neighboring buildings
• Vehicles or roads
• Public infrastructure
• Individuals not employed on the site

This section includes legal fees, compensation awards, and court expenses.

Who Should Buy Contractors All Risk Insurance?

• Developers
• Main contractors
• Subcontractors
• Project consultants
• Property owners
• Financiers (many require CAR before releasing funds)

CAR insurance begins at site possession and runs through construction, testing, and the maintenance/defects liability period.

3. Why Kenyan Developers Need CAR Insurance

Kenyan construction sites face unique challenges—from sudden storms to theft of materials, soil instability, and complex urban environments. Developers must manage multiple teams, machinery, workers, suppliers, and deadlines simultaneously, all while protecting investments worth millions.

Here’s why having Contractors All Risk Insurance Kenya is essential:

1. Protection of Large Capital Investments – Unexpected events can cause massive financial loss. CAR ensures you can rebuild without derailing your budget.
2. Compliance With Lender Requirements – Most banks and SACCOs require a valid CAR certificate before project financing is disbursed.
3. Protection From Liability Claims – Third-party damages can result in expensive lawsuits—CAR shields you from these risks.
4. Minimizes Project Delays – Insurance accelerates recovery after loss, reducing downtime.
5. Builds Confidence Among Buyers and Investors – A well-insured project signals professionalism and credible risk management.

4. What CAR Policies Cover (Detailed Breakdown)

Below is a structured breakdown of what’s included in most CAR policies in Kenya.

4.1 Material Damage Coverage

4.2 Third-Party Liability Coverage

Covers:

• Damage to neighboring structures
• Pedestrian injuries
• Damage to vehicles or public ways
• Legal costs
• Compensation awards

Liability risks are especially high in dense areas such as Westlands, Kilimani, Ngara, and Eastleigh.

4.3 Optional Extensions Developers Should Consider

5. Common Exclusions in CAR Insurance

Knowing what’s NOT covered is crucial for avoiding surprises during a claim.

Understanding exclusions allows you to customize your policy and eliminate coverage gaps.

6. How CAR Premiums Are Calculated

Premiums depend on project type, size, and risk profile. Below is a typical estimate for the Kenyan market.

6.1 Typical Premium Ranges

6.2 Main Cost Drivers

• Contract value (sum insured)
• Project duration
• Site location (flood zones, city center, rocky terrain)
• Excavation depth
• Use of heavy machinery
• Claims history
• Extensions required
• Security and safety measures

Underinsurance or incomplete declarations can lead to reduced claim payouts.

7. Terms Developers Must Pay Attention To

These details significantly influence claims outcomes.

1. Average Clause – If you insure for less than the project’s true value, payouts are reduced proportionally.
2. Excess Structure – Some perils (like floods) have higher deductibles.
3. Named Insureds – Ensure all stakeholders—developer, contractor, subcontractors—are named.
4. Testing & Commissioning – Critical for MEP (mechanical, electrical, plumbing) work.
5. Escalation Clause – Protects against inflation in material costs.
6. Maintenance/Defects Liability Period – Covers minor fixes after handover.

8. How Step by Step Insurance Helps You Secure the Right CAR Cover

Developers often face the challenge of understanding complex policy wording, comparing underwriters, and ensuring the cover matches the risks. Step by Step Insurance simplifies this process and ensures you get exactly the protection your project needs—nothing less, nothing overpriced.

Here’s how we support you from start to finish:

How We Help (Summarized)

1. We Compare Kenya’s Top Underwriters for You – Instead of limiting you to one insurer, we compare options from Britam, CIC, ICEA Lion, Jubilee, GA Insurance, UAP Old Mutual, and Madison—ensuring you get the strongest coverage at the most competitive rate.
2. We Analyze Your Project’s Risk Profile – We assess location, design, excavation depth, materials, and project type to recommend a custom-fit policy.
3. We Customize Coverage to Close Hidden Gaps – We refine exclusions, limits, extensions, and wording to ensure full protection and avoid claim disputes.
4. We Negotiate Better Premiums and Terms – Our long-term relationships with insurers allow us to secure lower premiums, wider coverage, and faster approvals.
5. We Handle Documentation and Claims Support – From project initiation to the defects liability period, we help with certification, endorsements, renewals, and claims management—so you focus on building while we handle the insurance side.

9. Practical Claims Scenarios in Kenya

Scenario A: Storm Damage – Heavy rains destroy scaffolding and partially built walls. CAR covers: reinstatement costs + debris removal.

Scenario B: Theft of Steel – Material is stolen despite guards. CAR covers: theft if proper security measures were in place.

Scenario C: Crane Collapse – A crane accident damages a nearby building. CAR covers: third-party liability + legal fees.

Scenario D: Fire Outbreak – Faulty wiring causes a fire. CAR covers: contract works, materials, equipment (if insured).

These examples show how CAR protection prevents cashflow disruptions and costly delays.

10. Cost-Saving Tips for Developers

Reduce costs without compromising safety or coverage.

• Strengthen site security (CCTV, controlled access).
• Improve safety standards (toolbox meetings, PPE).
• Work with professional engineers and NCA-registered contractors.
• Bundle policies (CAR, WIBA, liability) for discounts.
• Consider annual blanket CAR cover for multiple projects.

11. Frequently Asked Questions

12. Conclusion

Construction is inherently risky, but the right insurance strategy can transform those risks into managed, predictable challenges. Contractors All Risk Insurance in Kenya protects your investment from physical damage, liability claims, and costly delays—ensuring your development progresses smoothly from foundation to handover.

With Step by Step Insurance, developers benefit from expert guidance, access to multiple top-tier underwriters, tailored coverage, and end-to-end support across the entire construction lifecycle. Your project deserves protection that is as strong and reliable as the structures you build.