Contractor errors and defects fuel offshore wind project losses

This accounted for over 60% of insurance claims in 2022.

The surge in offshore wind construction has led to a corresponding increase in insurance claims, creating a cyclical "boom and bust" pattern, according to GCube Insurance.

In a report, GCube said contractor error and defect continue to be the major root causes of offshore wind losses, representing 63% of claims by frequency in 2022, up from 55% in 2020. 

Its analysis also revealed that 48% of onshore (wind and solar) construction losses by severity are attributable to natural catastrophe and extreme weather, followed by contractor error and defect at 16%.

The insurer warned that these challenges may lead to delayed project start times and drive a surge in construction claims.

What the renewable energy sector needs to do is focus on long-term sustainability, GCube said. Offshore construction should prioritise project success over rapid growth, whilst onshore construction must prevent compounding natural catastrophe losses with human errors, it added.

To mitigate potential losses, GCube is also urging asset owners to have a robust baseline project plan supplemented by thorough project monitoring, understand the insurance policy, and develop trusted contacts in the supply chain to ensure quality control.

“The forthcoming period of construction activity – and the rising impact of extreme weather - requires a high concentration of risk management, insurance and claims expertise as the industry braces itself for an inevitable increase in losses,” said Fraser McLachlan, founder and CEO of GCube.

“Pivotal to minimising project disruption and unbudgeted expense will be the collaboration of insureds and insurers to exchange information and expertise throughout the project lifecycle,” he added.