As the renewables sector enters a new wave of global construction activity, the build out of projects continues to be jeopardised by contractor errors and defects, nat cats and extreme weather events, all potentially driving up construction claims, according to a report by GCube Insurance.

A new market insights study by GCube suggest that these challenges – both on- and offshore – may lead to delayed project start times and drive a surge in construction claims, which it says are among the most complex for insurers and asset owners to settle.

The report – which shares key findings from a decade of proprietary claims data, including £764m in construction all risks and delay in start up claims for onshore and offshore sectors – 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.

It also revealed that 48% of onshore construction losses by severity are attributable to nat cat and extreme weather, followed by contractor error and defect at 16%. 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.

The report also warns that new projects face increased risk of loss from two sources: the higher frequency of extreme weather; and the penetration into emerging markets – such as the US, MENA, and Asia – where there is less data to guide strong project management.

Fraser McLachlan, founder and CEO at 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 claims process for a loss in the construction phase will only become more complicated.”

GCube warns the target for offshore construction must be longer-term sustainability, prioritising successful project outcomes over rapid expansion, and supported by a growing pool of skilled contractors and specialist vessels. It also suggests that the target for onshore construction must be to prevent nat cat losses being compounded by human errors arising from the race to scale up technology.

McLachlan added: “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. 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.”

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