Principles of Project Finance

surance companies may have neither the credit standing nor the capacity to take

on the insurance requirements for a major project.

The local insurance companies therefore normally reinsure the risk on the inter-

national market: this reinsurance can provide the route to dealing with investors’

and lenders’ credit problems with the local insurers, by allowing a “cut-through” to

the reinsurance (i.e., the local insurer instructs the reinsurers to pay any claims di-

rectly to the Project Company or the lenders), hence reducing the local credit risk

issue (although there could still be a problem if the local insurance company, as the

person to whom the reinsurance payments are legally due, goes bankrupt).

§7.7 DIRECT AGREEMENTS

The EPC Contractor, O&M Contractor ...