Understanding Insurance Requirements in Bahrain Construction Projects
Construction projects in Bahrain are high-value, high-risk undertakings that involve multiple parties, heavy equipment, and potentially hazardous work environments. To safeguard against financial losses, delays, and legal liabilities, insurance coverage is a fundamental requirement not just for compliance, but for risk management.
From contractors and developers to consultants and subcontractors, every party has a role in ensuring that adequate insurance is in place before and during project execution. This blog explains the key insurance requirements for construction projects in Bahrain, common pitfalls to avoid, and how legal professionals typically help address disputes over coverage. A general illustrative example is also provided.
Why Insurance Is Essential in Construction
Construction insurance protects against:
- Physical damage to works, equipment, and materials
- Third-party injuries or property damage caused during construction
- Worker injuries and related liabilities
- Project delays due to covered risks (e.g., fire, flood, accidents)
- Contractual obligations in public and private tenders
Without proper coverage, even a single incident can cause severe financial and legal consequences.
Common Insurance Types Required in Bahrain Construction
- Contractor’s
All Risks (CAR) Insurance
Covers physical loss or damage to the works, materials, and equipment on-site, as well as third-party liability for property damage and bodily injury. - Workmen’s
Compensation Insurance
Required under Bahraini labor law to cover employees for work-related injuries or illnesses. - Public
Liability Insurance
Protects against claims from third parties for injury or property damage caused by construction activities. - Professional
Indemnity Insurance (for consultants/engineers)
Covers design errors, omissions, or negligence that cause loss or defects. - Employer’s
Liability Insurance
Supplements workmen’s compensation by covering additional claims from employees. - Motor
Vehicle Insurance
For construction vehicles operating on public roads.
Some contracts particularly government and large private projects may also require marine cargo insurance for imported equipment or materials.
Legal and Contractual Framework
In Bahrain:
- Many public tenders and large-scale projects mandate specific insurance policies before work starts.
- Standard FIDIC-based contracts require contractors to maintain CAR and liability coverage throughout the project duration.
- Proof of insurance must be provided before mobilization and kept valid until the defects liability period ends.
- Employers have the right to withhold payments or suspend work if required insurance is not maintained.
Failure to comply can lead to contract termination, fines, or liability for uninsured losses.
Common Pitfalls in Construction Insurance
- Insufficient coverage limits that don’t match the contract value
- Lapsed policies due to late renewal
- Ambiguous policy wording that leaves coverage gaps
- Failure to include subcontractors under the main policy
- Unclear responsibility for arranging and paying premiums
Steps to Ensure Compliance and Protection
- Review the contract for all insurance requirements before signing.
- Engage a reputable insurance broker familiar with Bahraini construction needs.
- Confirm coverage limits match project value and potential risks.
- Ensure all parties — contractors, subcontractors, consultants — are covered.
- Monitor policy renewals and keep records accessible for inspections.
- Consult a lawyer if there’s a dispute over coverage, claims, or contract compliance.
Example:
In a mixed-use development project, the contractor arranged a Contractor’s All Risks policy but failed to include subcontractors under the coverage. Midway through construction, a scaffolding collapse caused significant damage to completed works and injured several subcontractor employees.
The insurer refused to pay for certain damages, citing that the subcontractors were not named in the policy. The project owner, facing delay and repair costs, initiated a contractual claim against the contractor. A lawyer was brought in to review the contract and policy wording. It was determined that the contractor had breached the insurance clause, making them fully liable for the losses.
This scenario highlights how incomplete or poorly managed insurance arrangements can expose parties to substantial financial and legal risks.
Best Practices for Project Owners
- Require insurance certificates before allowing site work to begin
- Verify policy terms, limits, and endorsements with an independent advisor
- Keep a calendar of all renewal dates and request updated policies regularly
- Clearly state in the contract who is responsible for arranging and paying for insurance
Best Practices for Contractors
- Engage with insurers early to structure coverage for all site activities
- Include subcontractors and specialist suppliers in the policy
- Keep proof of insurance on-site for inspections
- Notify the insurer immediately of any incident or potential claim
- Renew policies on time to avoid lapses