Reinsurance News

Quality control issues behind rise in offshore wind claims: GCube

2nd November 2021 - Author: Matt Sheehan

A new report by renewable energy underwriter GCube Insurance argues that corrective action is needed within the offshore wind sector to incentivise quality control processes and accountability for financial losses.

Analysts noted that increasing focus on cost-competitiveness has led to prolific cost-cutting in the design, manufacture, construction and operation of offshore wind over the past decade.

And this competitiveness has increasingly come at the expense of quality control, increasing the frequency and severity of insurance claims in the sector, and putting pressure on a strained insurance market.

GCube’s report highlights that combined market losses grew from £124 million in 2010-2015 to £500 million by 2020, with the average insurance claim nearly doubling from £1.67 million to £3.08 million in the same period.

Contractor error and component defect have accounted for 55% of these claims by frequency and 83% of total claims spend.

According to GCube, the “race to the bottom” on project costs, combined with a soft insurance market cycle exacerbated by broad policy terms, has resulted in significant change in the overall insurance market.

The firm therefore suggests that a re-evaluation is needed of how risk is allocated to support the market’s longevity, and should be implemented before new players enter the market and embed practices.

“Put simply, the insurance sector must take a more unified approach to writing offshore wind insurance, and the supply chain must accept its share of accountability on offshore wind claims,” said Fraser McLachlan, CEO of GCube.

“The cable protection system issues unearthed earlier this year have hopefully brought to attention the fact that action on quality control needs to be taken if the industry is to prevent further losses down the line,” he continued.

“Further accountability from all parties for their corresponding risks is now needed to share the load of responsibility, permitting sustainable development of narrower terms and bespoke policies. GCube’s longstanding experience in offshore wind insurance gives us significant insight into the underlying challenges and opportunities impacting the market, and we are committed to sharing learnings and recommendations to support our clients and the broader offshore wind industry at this critical juncture of progress.”

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