As the renewables sector enters a new wave of global construction activity, the build out of projects continues to be jeopardised by various factors, according to insurer GCube.
These factors, which include contractor errors and defects, natural catastrophe (Nat Cat) and extreme weather events, both on- and offshore, may lead to delayed project start times and drive a surge in construction claims.
These claims are among the most complex for insurers and asset owners to settle, stated GCube.
“Arrested Development: Managing complex claims in the boom-and-bust world of renewables construction” shares findings from a decade of proprietary claims data, including $1bn in Construction All Risks (CAR) and Delay in Start Up (DSU) claims for onshore and offshore sectors.
The report found that 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.
Historically, increased offshore construction activity has been matched by a surge in insurance claims, forming a cyclical “boom and bust” pattern.
Nearly 50% of onshore (wind and solar) construction losses by severity are attributable to Nat Cat and extreme weather, followed by contractor error and defect at 16%.
Of weather-related losses, flooding and heavy rainfall prove to be the costliest weather events, representing 18% of total claims by frequency but 46% of the total claims cost.
GCube highlighted that these construction claims trends broadly mirror the picture for operational projects.
However, the impact of losses from both human error and weather-related events on construction projects can be far greater – leading to more complex and costly insurance claims.
Fraser McLachlan, Founder & CEO, GCube, said: “The appetite for installing new projects makes this a historically busy period for the renewables sector.
“It’s also a period marked by unprecedented Nat Cat threat, and a shortage of skilled workers and specific installation equipment, like vessels and cranes.
“What this means is that the Delay in Start Up (DSU) claims process for a loss in the construction phase will only become more complicated.”
As construction activity ramps up in the coming months, GCube’s core recommendations include having a robust baseline project plan supplemented by thorough project monitoring and developing trusted contacts in the supply chain to ensure quality control.