Offshore vs Onshore Projects: How Insurance Coverage Differs

Key Takeaways

• Offshore and onshore projects face different construction and operational risks.
• Onshore projects are typically insured under Contractors All Risk (CAR) Insurance.
• Offshore projects often require specialised marine and offshore insurance covers.
• Weather, logistics, equipment replacement, and project accessibility significantly influence insurance requirements.
• Selecting the right insurance programme depends on the project's location, scope, and contractual obligations.

What are Onshore Projects?

Onshore projects are construction or engineering works carried out on land. They generally involve easier site access, established transport networks, and comparatively straightforward logistics.

Examples include:

• Commercial buildings
• Manufacturing plants
• Warehouses
• Roads and highways
• Metro rail projects
• Airports
• Hospitals
• Industrial facilities
• Solar power plants
• Transmission substations

Although these projects involve significant risks, they usually operate in more accessible environments than offshore developments.

What are Offshore Projects?

Offshore projects are developed in seas, oceans, or other large water bodies. These projects often involve specialised vessels, subsea equipment, marine construction techniques, and highly skilled personnel.

Examples include:

• Offshore wind farms
• Offshore oil and gas platforms
• Subsea pipelines
• Floating production facilities
• Offshore substations
• Marine cable installation
• Offshore renewable energy projects

Working offshore introduces additional environmental, logistical, and operational challenges that are rarely encountered on land.

Offshore vs Onshore Projects: Key Differences

Why Insurance Requirements Differ

The purpose of insurance remains the same, protecting projects against unexpected losses, but the risks vary considerably.

An onshore project may primarily face risks such as:

• Fire
• Flood
• Storm damage
• Theft
• Accidental collapse
• Third-party liability

An offshore project, however, may also face:

• Rough sea conditions
• Cyclones
• Vessel collisions
• Offshore lifting operations
• Marine transit risks
• Damage during subsea installation
• Difficult emergency response
• Environmental pollution exposures

Because of these additional risks, offshore insurance programmes are generally more specialised.

Insurance for Onshore Projects

Most land-based engineering projects rely on Contractors All Risk (CAR) Insurance during the construction phase.

Depending on the project, the insurance programme may also include:

• Third-party liability cover
• Contractors' Plant and Machinery (CPM) Insurance
• Marine Cargo Insurance
• Delay in Start-Up (DSU) Insurance
• Employees' Compensation Insurance

The exact combination depends on the project scope and contractual requirements.

Insurance for Offshore Projects

Offshore developments often require multiple insurance policies because of the complexity of marine operations.

These may include:

• Offshore Construction All Risk Insurance
• Marine Cargo Insurance
• Hull and Machinery Insurance
• Protection and Indemnity (P&I) Insurance
• Delay in Start-Up (DSU) Insurance
• Third-Party Liability Insurance
• Environmental Liability Cover

The insurance structure is generally more customized due to the higher level of exposure.

Construction Risks: Offshore vs Onshore

This comparison highlights why the same insurance policy may not be suitable for both project types.

How Project Delays Affect Coverage

Project delays can occur in both environments, but the reasons often differ.

Onshore Projects

Delays may result from:

• Heavy rainfall
• Labour shortages
• Equipment breakdown
• Material shortages
• Regulatory approvals

Offshore Projects

Delays are frequently influenced by:

• Rough sea conditions
• Cyclones
• Limited weather windows
• Vessel availability
• Marine logistics
• Offshore lifting restrictions

These differences also influence underwriting and project scheduling.

Challenges Faced by Insurers

From an insurance perspective, offshore projects are generally more difficult to evaluate.

Some key underwriting considerations include:

• Remote project locations
• High-value equipment
• Weather exposure
• Availability of replacement components
• Emergency evacuation arrangements
• Contractor experience
• Project duration
• Marine operations

These factors often result in more detailed risk assessments before coverage is offered.

Real-Life Example

Consider two renewable energy projects of similar capacity.

The first is a 200 MW solar power plant being built on land. Construction materials and equipment can be transported by road, damaged components are relatively accessible, and repair work can begin quickly after an insured event.

The second is an offshore wind farm located several kilometres from the coastline. Turbines must be transported using specialised vessels; installation depends on favourable sea conditions, and any repair work requires marine equipment and experienced offshore crews.

Although both projects generate renewable energy, the risks involved and, therefore, the insurance requirements are significantly different.

Choosing the Right Insurance Programme

Project owners should consider several factors before deciding on the insurance structure.

These include:

• Project location
• Construction methodology
• Contract value
• Marine operations involved
• Equipment values
• Natural catastrophe exposure
• Project duration
• Contractual obligations
• Lender requirements

A project-specific insurance review helps ensure that the selected cover reflects the actual risk exposure.

Conclusion

While offshore and onshore projects may appear similar from an engineering perspective, their risk profiles differ considerably. Offshore developments operate in more challenging environments, involve specialised equipment, and face greater logistical and weather-related uncertainties. As a result, they typically require a broader and more customized insurance programme.

Onshore projects, on the other hand, are generally protected through Contractors All Risk Insurance along with other supporting covers depending on the project's requirements. Understanding these differences enables project owners, developers, and contractors to select insurance solutions that align with the realities of their construction environment rather than relying on a one-size-fits-all approach.