'We are starting to look into the issue of insurance for contractors,' a senior source within the CPA told MEED on 14 April. 'We don't want a situation where insurers begin to refuse cover. It has not been a good week and commercial contractors have largely retreated to their secure operating bases.'

Insurers say the situation is so volatile that insurance markets may be unwilling to provide cover. 'It is possible that contractors will have to self-insure,' says one broker. 'There may be circumstances where underwriters will not want to provide cover so they will offer terms that contractors will not want to pay.'

Insurance premiums for reconstruction contractors have risen by as much as 20-25 per cent since the start of April. 'Underwriters are taking much greater caution than before,' says Martin Stone, a director in the counter terrorism and political risk team at AON London. 'The situation is so fluid that they are micro-managing the terms they offer. They want to know all the risks facing the people seeking cover so they are looking in detail at what is happening. They are particularly obsessed with location: whether the contractor is in hot spots such as the Sunni triangle, the road to Jordan, Baghdad or Fallujah.'

Cover still remains available, although given the fluid situation, quotes are usually for a maximum of seven days. 'The terms offered depend on who is providing security, whether it is the army or a private security contractor, and where it is. We are following the situation on a day-to-day basis,' says another underwriter.

Fears of a mass pullout of contractors have been sparked by the targeted kidnapping of foreigners working in the country. Acting on the advice of Moscow, Russia's Technopromexportis withdrawing its 370-staff working on the 1,400-MW Al-Shamil power station near Baghdad. France has also advised its nationals working in the country to leave. As MEED went to press, the US-led coalition estimated that about 40 people from 12 countries were being held hostage. 'So far none of the prime contractors is preparing to pull out but the situation is under constant review,' says the CPA source.