The operating concession as a distinct risk
Most highway insurance discussion focuses on the construction phase: the contractors all risks cover for building the road, the surety bonds backing the contractor's obligations. The operating phase of a BOT (Toll) concession is a different risk with a different owner, and it has been comparatively under-examined even as it returns to prominence.
NHAI identified 53 BOT (Toll) projects worth around Rs 2.2 lakh crore covering 5,200 km to be bid out, signalling a major revival of operator-borne traffic-risk concessions after years in which annuity and hybrid models dominated. As these projects move from build to operate, the relevant risk shifts from the engineering of construction to the running of a tolled asset over a long concession period.
The operating concessionaire owns and maintains a fixed linear asset (the carriageway, structures, toll plazas, electronic tolling systems and operations infrastructure) and earns revenue by collecting tolls from users. That combination, a long-lived physical asset whose entire commercial purpose is to generate a revenue stream from traffic, is what defines the operating risk. The exposures group into three: physical damage to the asset, interruption of the toll revenue, and liability to the road users and third parties who interact with the asset every day. This profile takes each in turn and then sets them against the concession's contractual and monetisation context.
Who bears traffic risk, and why it shapes the BI
The single most important variable in reading an operating highway concession is who carries traffic risk, because it determines whether revenue, and therefore business interruption, is even an exposure for the concessionaire.
In BOT (Toll) concessions the concessionaire collects tolls and bears traffic risk directly, so its revenue rises and falls with the volume of vehicles using the road. By contrast, in Hybrid Annuity Model (HAM) and BOT (Annuity) concessions the concessionaire is paid by the authority on an availability or annuity basis and carries no traffic risk. This distinction is not academic; it changes how, and whether, business-interruption cover is structured.
Why this matters for the time-element cover
For a BOT (Toll) operator, an insured physical event that closes or partially closes the road (a bridge or culvert collapse, flood damage, a major fire at a toll plaza, structural damage from an accident) does not just cost the repair; it interrupts the toll revenue for as long as the road or a section of it cannot carry its normal traffic. The business-interruption exposure is real and is denominated in lost toll income over the repair period.
For a HAM or annuity operator the same physical event still requires repair, but the revenue, being availability or annuity-based, behaves differently, so the time-element cover is framed around the contractual payment mechanism rather than around traffic volume. A broker placing operating-phase cover must therefore first establish the concession type, because it dictates whether the business-interruption section is protecting a traffic-driven toll stream or a contractual payment, and the two are underwritten differently.
Property and business interruption on a linear asset
The property exposure of an operating highway is unusual because the asset is linear, exposed and continuously in use, which shapes both the material-damage and the business-interruption cover.
The physical asset spans kilometres of carriageway and includes bridges, culverts, embankments, retaining structures, toll plazas, electronic toll-collection equipment, and operations and maintenance buildings. The dominant perils over a long concession are natural catastrophe (flood, landslide, earthquake affecting structures and embankments), fire at plazas and buildings, and damage to structures from accidents or overloading. A linear asset is also geographically spread, so a single weather event can damage multiple points along the alignment at once.
Matching the BI to the asset and the revenue
The business-interruption cover for a BOT (Toll) operator must connect the physical loss to the revenue consequence. A flood that washes out a section, or damage that closes a major structure, can divert or stop traffic and cut toll collection until the asset is restored and reopened. The indemnity period needs to reflect the realistic time to repair major civil structures, which can be long, and the cover should contemplate partial interruption, since a road can often carry reduced traffic on a damaged alignment rather than close entirely.
The practical underwriting questions are the catastrophe exposure of the specific corridor (its flood and seismic profile), the vulnerability of the major structures, the realistic repair durations, and how toll revenue maps to the parts of the asset most exposed to a serious loss. A submission that quantifies the revenue consequence of damage to the most exposed structures, rather than treating the road as an undifferentiated property value, is what lets an underwriter price the business-interruption section properly.
Third-party liability and the road user
An operating toll road interacts with the public continuously, and that interaction is a liability exposure that a construction-phase view does not capture.
The operating concessionaire owes duties to the road users who pay to use its asset. Defects in the carriageway, inadequate signage, poorly maintained structures, or failures at toll plazas can contribute to accidents, and the concessionaire can face third-party and public-liability claims arising from the condition and operation of the road. Unlike the construction phase, where the exposure is to workers and the immediate works area, the operating phase exposure is to a large, continuous flow of members of the public using the asset by design.
This makes Public Liability Insurance and third-party liability cover a core part of the operating programme rather than an add-on. The cover responds to injury and damage suffered by third parties for which the concessionaire is legally liable, and on a high-traffic corridor the frequency of incidents and the potential for serious claims make this a genuine and recurring exposure. The maintenance obligations in the concession, the standards to which the road must be kept, are directly relevant, because a failure to maintain to standard is both a contractual breach and a potential source of liability.
The operating programme therefore brings together commercial property cover on the asset, business interruption tied to the revenue model, and public and third-party liability for the road users, with the maintenance standard running through all three as the thread that links the concessionaire's contractual duties to its insurable exposures.
The concession agreement, InvIT monetisation and structuring
The operating risk does not sit in isolation; it is shaped by the concession contract and, increasingly, by how the asset is financed and monetised.
The Model Concession Agreement sets insurance and security obligations on the concessionaire. The amended agreement permits the concessionaire to furnish performance security as an IRDAI-authorised insurer's surety bond, with the quantum revised to 3% of the estimated project cost, reflecting the growing role of surety as an alternative to bank guarantees in infrastructure. The agreement also stipulates the insurances the concessionaire must maintain over the concession period, so the operating programme is partly a contractual compliance exercise, and the broker's task includes ensuring the placed cover meets the concession's requirements.
Monetisation adds another dimension. Operating highway assets are increasingly held in infrastructure investment trusts, and MoRTH planned to launch a public infrastructure investment trust, Raajmarg InvIT, targeted for issue in January 2026 under SEBI InvIT Regulations, alongside the existing NHAI InvIT. When an operating asset moves into an InvIT, the risk does not change physically, but the stakeholders do: the trust and its investors rely on the toll revenue stream, which raises the importance of the business-interruption cover that protects that stream and of the insurance assurance the trust requires from the operating asset.
Pulling this together, an operating-phase programme should:
- Match the property and business-interruption cover to the concession type and the revenue model.
- Provide public and third-party liability cover sized to the traffic and the maintenance obligations.
- Satisfy the insurance and security obligations of the concession agreement, including any surety-bond performance security.
- Reflect the assurance needs of an InvIT or other financing party where the asset is monetised.
Structuring all of this depends on understanding how property, business-interruption and liability wordings respond to catastrophe damage on a linear asset and how the cover meets the concession's contractual terms. Sarvada gives commercial insurance brokers structured, searchable access to insurer policy wordings and the intelligence around them, so an operating-highway placement is built on what the cover really says and what the concession requires rather than on assumption. Request Access to ground your next infrastructure placement in the wording detail that decides claims.