Offshore wind farms have been in operation in Europe since the early 1990s. Technical advancements in the ensuing 30 years has helped offshore wind power achieve remarkable results all over the world and is now one of the most important sectors of renewable energy, attracting significant international investment.
Although European countries such as the United Kingdom, Germany and Denmark have pioneered the technology, China has been rapidly ramping up installed offshore wind power capacity to the point where it is already greater than that installed in the UK.
Special Risks
By the very nature of their locations, offshore wind farms are exposed to significant marine environment risks that in the Chinese insurance market are classed as "special risks". In addition to the offshore risks encountered in European projects, Chinese projects need to factor in some additional risks such as typhoons and risks associated with the sheer scale of the projects involved.
In China a typical offshore wind farm capacity is 300-500 MW which is far greater than the capacity of the windfarms installed in Europe 30 years ago, so the learning curve for the local contractors and operators is very steep.
We are now seeing significantly larger tower structures, longer wind turbine generator blades and typhoon class wind turbines being installed and operated in the more complex marine environments of offshore China.
Marine Warranty Survey Requirements
Offshore wind projects in China are often insured locally with significant reinsurance in the international reinsurance markets. Based on our experience handling offshore wind project losses in China, underwriting capacity is limited by the retention of the local insurance market. Reinsurance is arranged on an individual project basis and requires the support of the international insurance market. International reinsurers will generally stipulate that the services of a Marine Warranty Surveyor (“MWS”) are employed during the construction of the windfarm.
For those not familiar with this requirement, a MWS is an independent third-party supervisory agency with significant experience in marine and offshore engineering risk control that is engaged as the reinsurers’ “eyes and ears” on the project, whose purpose is to minimise reinsurers’ exposure to specific construction risks. An MWS is engaged extensively on all offshore construction in Europe, and as required by Insurers elsewhere.
MWS conduct technical reviews and evaluation of the project to ensure the safety of critical procedures and processes, as well as making sure that these are adhered to during the project execution. MWS requirement is fully incorporated in the reinsurance contract for European offshore wind projects. However, the role of the MWS for offshore wind farm construction in China is yet to be clearly defined.
There is very often no requirement for the appointment of an MWS in offshore wind construction insurance contracts originating in China. However, a suitably qualified engineering supervisor in the field of construction is required by Chinese construction law with third-party engineering supervisory agencies being employed by offshore wind project owners to provide project oversight.
Can engineering supervision replace MWS?
Although the scope of work for this third-party engineering supervision and that of the traditional MWS partially overlaps, there is still a significant difference between the two. Third-party engineering supervision focuses on the quality of the project, whereas the MWS focuses on the safe performance of critical operations during construction, transportation and installation phases.
In general, engineering supervision centres around quality of construction and that safety standards are being adhered to. Engineering supervision also ensures that the installed project facilities meet the technological requirements and that project cost and capital control are in accordance with relevant laws and regulations.
However, the marine warranty surveyor provides independent technical review and approval of high-risk construction and transportation operations, including inter alia vessel suitability, heavy lifts and weather parameters for offshore installation works. For instance, a marine warranty surveyor may call a stop to the installation process offshore when wind speed and/or sea state deteriorates beyond specified limits.
Final Thoughts
MWS plays a critical role in managing risks for offshore wind projects during construction and undoubtedly all parties benefit from it. For the project owner, involvement of the marine warranty surveyor will complement the role of the engineering supervisor, which will have a positive effect on the long-term development of the offshore wind industry in China.
From an insurance perspective, MWS has a role to play in the construction of offshore wind farms in China, and we expect to see it being a more common requirement in policies in future. However, when insurers and reinsurers are determining the scope of work for the MWS, recognition and awareness of the work being done by the legally required third-party engineering supervisor should be given to avoid unnecessary duplication of effort and potential conflict.
"...involvement of the marine warranty surveyor will complement the role of the engineering supervisor, which will have a positive effect on the long-term development of the offshore wind industry in China."
Keith Lee
Associate Director, Natural Resources, Charles Taylor Adjusting
keith.lee@charlestaylor.com
Expertise:
CAR & Operational, Business Interruption, Upstream Construction and Operations, Conventional and Renewable Power Generation, Engineering and Construction, Risk Analysis, Construction Management, Project Mobilisation
Location:
Singapore
