Renewables Construction Boom Faces Rising Risks, New GCube Report Reveals

As the renewables sector enters a new era of global construction, it is encountering significant challenges that could lead to project delays and a surge in complex insurance claims. These issues, including contractor errors, defects, and extreme weather events, are impacting both onshore and offshore projects, according to a recent market insights report by GCube Insurance.

The report, titled “Arrested Development: Managing Complex Claims in the Boom-and-Bust World of Renewables Construction,” draws on a decade of proprietary claims data, revealing that $1 billion in Construction All Risks (CAR) and Delay in Start-Up (DSU) claims have been filed for both onshore and offshore renewables projects.

Key findings from the report include:

• Contractor error and defect were the leading causes of offshore wind losses, accounting for 63% of claims by frequency in 2022, up from 55% in 2020.
• A cyclical pattern of increased offshore construction activity followed by a rise in insurance claims has been observed.
• For onshore wind and solar projects, 48% of construction losses by severity are attributed to natural catastrophes and extreme weather, with contractor error and defect contributing 16%.
• Among weather-related losses, flooding and heavy rainfall were the most costly, representing 18% of total claims by frequency but 46% of the total claims cost.

The report highlights that while trends in construction claims align with those seen in operational projects, the stakes are higher for construction projects due to the increased complexity and cost of claims resulting from human errors and weather-related events.

Fraser McLachlan, Founder and CEO of GCube, emphasized the challenges facing the renewables sector: “The current surge in new projects, coupled with unprecedented natural catastrophe threats and a shortage of skilled workers and specialized equipment, is making the Delay in Start-Up (DSU) claims process increasingly complicated.”

GCube’s data underscores the importance of long-term sustainability in offshore construction and the need to mitigate Nat Cat losses in onshore projects by addressing human errors, as outlined in GCube’s 2023 “Vertical Limit” report.

To manage potential losses, GCube advises asset owners to:

• Implement a robust baseline project plan with thorough monitoring.
• Understand insurance policies and seek expert advice.
• Develop reliable contacts within the supply chain to ensure quality control.

McLachlan concluded: “The forthcoming construction boom, combined with rising extreme weather impacts, necessitates a focused approach to risk management and insurance. Collaboration between insured parties and insurers will be crucial in minimizing project disruptions and unexpected costs.”

The report serves as a critical reminder for the renewables sector to adapt its strategies to manage the evolving risks associated with construction projects.