Think insurance when drafting offshore wind contracts, say experts

Niamh Deery and Cathleen Clark of Pinsent Masons were commenting as developers grapple with rising insurance premiums and widening exclusions in insurance policies at a time when project economics are tightening more broadly.

“Insurance premiums are rising, deductibles are increasing, and exclusions are widening – especially around cable failures, serial defects, weather‑driven delay, and floating‑wind specific risks,” said Deery. “This is making it more difficult to secure the levels of cover that were standard for projects even a few years ago.”

“Rising capital expenditure across UK projects, driven by inflation, supply chain constraints and higher financing costs, also means developers are seeking better coverage right as the insurers are seeking to offer less. Contractors, whose own insurance cover is narrowing, are also pushing back harder on indemnities, liability caps and defects obligations in contracts, which – again, only a few years ago – were positions that developers were generally able to secure. The result is a growing ‘insurance gap’ that developers often end up absorbing. This has implications down the line when developers go to sell the transmission assets to future offshore transmission owners (OFTOs),” she said.

Clark said developers that engage with insurance issues early in the contracting process can reduce their risks.

“Insurance is often left until the end of negotiations, but this consistently results in delayed signature, reduced negotiating leverage and a situation where contractors ‘run down the clock’ to push developers into accepting positions that shift traditionally contractor‑held risks back onto the project,” Clark said. “Treating insurance deviations as a high‑priority issue from the outset, and insisting on early contractor comments rather than accepting holding notes, gives developers the time and leverage needed to challenge positions, identify gaps and explore alternative solutions with brokers.”

Early identification of insurance gaps also allows package teams, legal advisers and insurance specialists to coordinate their response, prepare negotiation strategies and understand where risks are genuinely uninsurable, according to Deery, who stressed the importance of “internal discipline” too.

“Project teams should be stress‑testing preferred technologies, agreeing fallback positions and ensuring the right people are prepared and present for key negotiations,” Deery said. “These steps help avoid being forced into accepting contractor base‑case proposals simply due to time and/or commercial pressure.”

According to Clark, developers should use the need to secure buy-in for the project from lenders or investors and future due diligence requirements as a negotiation tool.

“Construction contracts must withstand scrutiny from future investors, OFTO bidders and their lenders, meaning developers cannot accept substantial underwriting of risk that would undermine the project’s attractiveness,” Clark said. “Full consultation with insurance teams ensures gaps are intentional, understood and managed, rather than accidental exposures created by negotiation fatigue.”