The construction sector facing challenges like geographic vulnerabilities and insufficient risk management, hindering development goals. The mitigation of unknown uncertainties in the construction industry for mainly client and contractor interest facilitated through non- life or general insurance, called Contractors All Risk (CAR) insurance. There's a lack of effective risk management strategies, particularly in developing countries like Nepal. Following the 2015 earthquakes in Nepal, the significance of insurance in risk management was highlighted. The primary objectives were to assess the effectiveness of CAR insurance in construction projects within Kathmandu Valley, investigate factors influencing claim success, and identify potential areas for improvement in risk management practices. These objectives were further verified through expert opinion to enhance CAR effectiveness. The method assessed building construction projects in Kathmandu Valley with CAR insurance coverage. Data from 113 completed questionnaires out of 135 distributed were analyzed, reflecting 83.70% completion rate. A high response rate individually from contractors (90.00%) and insurers (76.00%) enriched the understanding of CAR insurance efficiency. The method used to analyze collected data were tabulated and processed using RII, Bloom’s cutoff, and smart PLS-SEM software. Recommendations from KII interviews were also integrated to enhance CAR insurance effectiveness in building construction projects. This study determined with the contractor’s perception, the CAR policy effectively safeguards contractor interests (RII: 0.800, Rank: 1), presents of inadequate risk assessment resulting insufficient coverage or high premiums (RII: 0.769, Rank: 2) and CAR insurance supports proactive risk management, identifying and mitigating potential hazards for smoother project execution (RII: 0.764, Rank: 3). Likewise, insurer’s perception highlighted significant concerns, presents of insufficient risk management knowledge and expertise (RII: 0.858, Rank 1), limited understanding and knowledge of construction works (RII: 0.805, Rank 2), and presents of the absence of risk assessment (RII: 0.784, Rank 3). These were majors that affecting the efficiency of CAR insurance in building construction project from the contractors’ and insurers’ respondent perspective. And also, the analysis with Bloom’s Cutoff categorized responses, revealing contractors’ felt improvement with higher viii attention, and insurers’ felt improvement with moderate attention to enhance the effectiveness of CAR insurance. Correspondingly, the factors influencing CAR insurance effectiveness in selected building projects were examined. Model fit tests indicated excellent fit for three parameters while two fell below threshold values. Hypotheses testing supported three hypotheses at a 5% significance level. Notably, the relationship between insurer and claim success demonstrated the highest significance (t-value = 5.244, β = 0.287), followed by organization role and support (t-value = 4.310, β = 0.191), and knowledge and experience of claims (t- value = 3.277, β = 0.184). Also, the R2 and Q2 values of the CS, the dependent variable, at 0.369 and 0.275, respectively, indicated a suitable level of predictive accuracy and significance within the PLS path model. This research accredited the effectiveness of Contractor’s All Risk (CAR) insurance, emphasizing its role in comprehensive risk coverage and proactive risk management. Addressing challenges such as inadequate risk assessment and market pressures calls for improved regulations and insurer support to enhance risk management practices. And the research recommends to enhance CAR insurance effectiveness encompassed improving risk assessment practices, streamlining claim processes, fostering collaboration can contribute to more efficient risk management and better outcomes in building construction projects within Kathmandu Valley.

Keywords

Contractor’s All Risk (CAR), Insurance, PLS-SEM, Relative Important Index (RII), Claim Success, Building Construction Projects, Kathmandu Valley.

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