Marine Contractor Risks Facing the Industry

There are numerous marine contractor risks facing the industry, and it is vital to understand them and solve them. Moreover, the International Marine Contractors Association (IMCA) deems marine contracting in offshore wind unfair and “increasingly unsustainable”. The trade body recently released an update to its Renewables Contracting Principles (IMCA LCIC 014). Ultimately, they cautioned against poor market conditions stemming from unrealistic expectations regarding the capital costs and risks involved in developing offshore wind energy.

Marine Contractor Risks

There are ways to handle the risks. Therefore, we took an in-depth look at the risks and how to allocate them.

Allocation of Risks

Allen Leatt, the CEO of IMCA, recently disclosed how the system faced uncovered risks. Ultimately, he stated that it put the long-term sustainability of offshore wind energy at risk. Leatt reiterated that the only way to address this is through a more equitable allocation of risks and convergence of project goals among government, marine contractors, developers, investors, and the supply chain.

Leatt emphasized an allocation of risk that recognizes the reality of offshore construction and reflects the need to encourage the development of increasingly technologically advanced project solutions. Moreover, greater flexibility and fairness are needed by allocating the risk to the party who created it. 

Without fairer allocation of risks, marine contractors will not be able to handle the “inevitable” inflationary cycle. Then, investment decisions in offshore wind will be heavily affected. It’s why trade associations such as IMCA, representing most contractors in the global offshore industry, have called for industry and government action to balance the scales.

Examples include the terms of payment. Therefore, IMCA stated that “projects can grind to a halt” if developers do not manage cash flow responsibly they do not pay contractors on time. Similar problems occur regarding weather risk, insurance coverage, and delay damages.

Trust and Cooperation 

The association also called on the worldwide offshore wind sector to embrace a mindset of “mutual trust and cooperation” to overcome the challenges, much like the offshore oil and gas industry did when confronted with similar difficulties. 

According to Leatt, solutions are “readily available” and achievable through collaboration between developers and contractors to mutually agree on project costs, schedules, and quality objectives. The joint action will ensure delegators allocate and distribute risks responsibly and fairly.

Keep the Conversation Going

The International Marine Contractors Association plans to engage with key industry stakeholders, including relevant industry bodies and trade associations, government agencies, offshore clusters, investors, developers, and the insurance market, to keep the conversation going and resolve the challenges in offshore wind energy. 

About Merrimac Marine Insurance

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