Kathmandu. According to the report of the Insurance Authority of Nepal, Nepal’s hydropower projects are becoming very sensitive and risky from the natural and environmental point of view.TAG_CLOSE_b_46 The hydropower sector is facing a major crisis due to the topography and unusual changes in the weather.
The NEA published a study report on Nepal’s hydropower projects, ‘ Hydropower Insurance in Nepal: Assessment of Trends, Challenges, and Opportunities for Reform{‘, said that the traditional method of environmental assessment is no longer enough to study the feasibility of hydropower projects. It has been concluded that it is imperative for hydropower developers to adopt technology that can withstand the risk of climate change while designing projects.
According to the report, the project’s dams, sand settling ponds and power houses have been severely damaged time and again due to glacial lake outbursts, unexpected cloud bursts, floods and massive landslides.
According to the report, the size of the claim on the part of power producers due to damage to hydropower has been gradually increasing in the last five years.
Analysing the data provided in the report, the insurance claims for property and profit due to business disruptions in hydropower projects are high. The need for adequate insurance coverage in the hydropower sector has been pointed out as the risk of property insurance and profit and loss is high.
The status of insurance claims related to hydropower projects is as follows:
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Property Insurance: Most of the claims in hydropower projects are under property insurance. The average annual average claim in this category is Rs 116.51 crore, which shows that the physical assets of the projects suffer huge losses.
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Profit and Loss: The profit and loss claims due to the interruption of the project are also consistently high. The average annual claim in this category is Rs 45.53 crore, which is evident from the huge financial burden due to operational disruptions.
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Construction Risk (CAR/EAR): However, there has been a decline in claims related to risk and accident during the construction phase. The total risk (CAR) portfolio of the contractor has come down from Rs 64.94 crore in FY 2077/78 to Rs 19.95 crore in FY 2081/82. Its annual average claim is Rs 45.47 crore.
Similarly, the Connection Risk (EAR) claim has also come down from Rs 28.49 crore to Rs 6.11 crore (annual average of Rs 14.88 crore).TAG_OPEN_p_53 This indicates a reduction in accidents at the construction and installation stages.
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Machinery Damage: Machinery breakdown claims are low on average with an annual rate of Rs 2.82 crore. The claim on the Machinery Profit Loss (MLOP) side is very low.
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Other: Various categories have seen increased risk. In the year 2081/82, the claims of this category increased to Rs. 8.28 crore, while its annual average claim was only Rs. 1.94 crore.
Total claim fluctuation
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The total estimated total insurance claim amount of the hydropower sector has fluctuated year after year. In the fiscal year 2077/78, the total claim was Rs 207.57 crore, which decreased to Rs 114.53 crore in the FY 2080/81. However, in the fiscal year 2081/82, this amount has increased to Rs 270.60 crore. Overall, the annual average claim of the sector is Rs 229.01 crore.
This data on insurance claims underscores the need for adequate insurance coverage for hydropower projects, even as risks are reduced in some areas.TAG_OPEN_p_48
