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Insurance in Project Finance: Mitigating Risk and Ensuring Success
Insurance plays a critical role in project finance, providing a critical layer of protection for investors, lenders, and project developers.
In this article, we will explore what project finance is, the different types of insurance commonly used in project finance, and the importance of insurance in protecting against various risks that can arise during the development and operation of a project.
We’ll also take a look at a case study of a real-world project that demonstrates the role of insurance in ensuring success.
What is project finance and how does insurance play a role?
Project finance is a method of financing large infrastructure and industrial projects based on the projected cash flow of the project, rather than the balance sheet of the project sponsors.
Because project finance is dependent on the future performance of the project, it is exposed to a wide range of risks, including construction risks, performance risks, and political risks.
Insurance plays a critical role in project finance by transferring these risks from the project sponsors to insurance companies.
