A Q&A With Arjun Sharma On Wet Civils, Ports And Marine Infrastructure Claims
The construction market for port facilities, terminals, reclamation works and marine infrastructure is booming, and likely to hit US $312bn by 20341. It’s a boom in so-called “wet civils” driven by increasing demand for infrastructure to support global supply chains, LNG export and import facilities, as well as deepwater requirements for ever larger offshore renewable energy equipment.
Concurrently, the sector is also grappling with weather events that impact existing port and maritime infrastructure and the planning for new construction – alongside high costs of capital vital for project lending, and an overall increase in port activity that can lead to general on-site accidents and incidents.
In this Q&A, Arjun Sharma, Director, Amwins Energy, Power & Infrastructure covers the critical points shaping future insurance coverage for construction and operational risks, where losses are occurring today, and why risk transfer is becoming significantly more technical.
Arjun – wet civils sounds highly specialised. What types of projects actually fall into this category?
Wet civils is a broad term, but generally we’re talking about projects where construction interfaces directly with water or marine environments.
That includes ports and terminals, tunnels, reclamation works, flood defences, dams, water treatment infrastructure, quay walls, dredging operations and marine logistics facilities.
These are some of the most technically challenging infrastructure projects globally because you’re dealing with a combination of heavy civil engineering, marine exposure, complex geotechnical conditions and environmental regulation, all at the same time.
From an insurance perspective, the risk profile is very different from a conventional commercial construction project.
There’s a lot of discussion around climate change and coastal infrastructure. Is that materially changing claims exposure?
To an extent – but there’s nuance, here.
Historically, many marine and hydraulic assets were designed using long-established wave, wind and storm surge assumptions based on historical datasets. This informs insurance policies that can then exclude damage caused by normal action of the sea.
Claims, therefore, tend to hinge on whether documented conditions exceeded policy-defined thresholds, rather than the damage incurred.
The challenge today is that the assumptions around, say, one in one-hundred-year storm surges, are under pressure from more volatile weather systems, meaning increased disputes between what are defined as normal or abnormal conditions.
Equally, according to research in some territories2, the variability and limited understanding of physical mechanisms makes it hard to attribute some trends in storms and waves to climate change.
Setting aside the drivers for claims, one important point is that wet civils losses are not always catastrophic headline events. In many cases, projects suffer progressive damage, flooding, erosion or delay without any dramatic structural collapse.
Underwriters are increasingly focused, therefore, on whether project designs are relying on outdated return-period assumptions or historic marine criteria that may no longer accurately reflect present-day conditions.
It’s also why we’re very focussed on benchmarking complex groundworks against formal industry standards – such as the Tunnelling Code of Practice – that can help ameliorate risk from scenarios such as unmapped subsurface variability or potential for groundwater ingress.
Are insurers seeing large catastrophe losses in this sector?
Yes – but not necessarily in the way people might expect!
For ports and terminals, operators usually have advance warning of major storms or hurricanes, which allows time to secure equipment and implement shutdown procedures. Large cranes can often be tethered or locked down ahead of severe weather.
However, if you take the broader gamut of higher risk project types for wet civils, the construction of stormwater and flood control infrastructure, as well as dams and spillways, can suffer significant damage from flooding owing to cofferdam or shoring failure. It’s why we tend to see bespoke underwriting programs given the loss-potential in the construction phase.
So, while climate volatility is definitely increasing underwriting scrutiny, many claims are still operational or engineering-led rather than pure catastrophe losses.
That said, wind-related incidents, particularly for ports, remain a major exposure.
The market recently saw a bulk shiploader toppled by strong winds in a loss valued at around $60 million. There have also been major crane collapses involving fatalities and losses in the region of $20 million.
The severity profile is increasing because the equipment itself is becoming more sophisticated, larger3 and significantly more expensive to repair or replace.
What is the nature of claims that you see in wet civils infrastructure, Arjun?
Well, it depends on the construction activity, of course, but claims across storm surge, dredging, liquefaction and marine infrastructure increasingly show that loss severity is often driven more by restrictions in coverage (was the storm severe enough under the wording), uncertainty (potential delays to recovery while terms are confirmed) and regulatory response (any need for environmental assessment) than by the initial physical damage itself.
In the case of dredging, for example – while pollution is typically excluded under marine liability and standard CAR policies (requiring specialist liability coverage) – environmental damage and regulatory claims in construction can lead to delay in start-up and significant third-party liability losses.
For operational exposure, one of the most frequent claims is still damage to mobile crane equipment in port facilities. These are often relatively contained losses, perhaps $1 million or less, but they occur regularly because cranes operate in highly exposed environments under constant stress.
Similarly, with gantry cranes and large container handling systems, repair capability globally is limited to a relatively small number of specialist firms, and lead times can be extremely long. Eighteen-month replacement timelines for cranes, gantries or shiploaders are no longer unusual.
That creates a very different claims dynamic because business interruption exposure can escalate quickly even where the physical damage itself is relatively localised.
Why do wet civils produce some of the most difficult claims to manage?
Wet civils can produce some of the most costly and technically complex claims seen by insurers, and in my view that is usually driven by a combination of three factors:
- Proximate cause of loss varying drastically in nature between long-term deterioration mechanisms such as corrosion or erosion, and short-term sudden and unforeseen events, including ground subsidence, tunnelling pressure changes or temporary works failures during dewatering.
- The potential for a very large number of affected third parties if a marine or hydraulic asset fails, particularly in cases involving dams, flood infrastructure or major transport links.
- The uncertainty involved in determining the precise cause of damage after an event, especially where multiple engineering, environmental and operational factors may be interacting simultaneously.
Does business interruption become difficult in that environment?
Very much so. Ports are operationally flexible environments, which makes business interruption and Delay in Start-Up claims particularly complex to quantify.
Operators are constantly adapting around disruption. One common example is “vessel shifting”, where shipping movements are reorganised to maximise throughput and minimise operational downtime.
You may have damage to a berth or shiploader, but the port operator mitigates the loss by rerouting vessels, increasing utilisation elsewhere or changing cargo sequencing.
That can significantly reduce the actual financial loss, but it creates a very complicated adjustment process because insurers need to understand what mitigation was realistically achievable and how throughput would have performed absent the loss.
Similarly, for the construction of water/ wastewater treatment facilities – or industrial water infrastructure projects – flood events, or the failure of temporary onsite structures, can lead to pollution events, delaying start-up until damage has been assessed and rectification works are underway.
Are there also issues around who actually suffers the financial loss?
Yes, and this is becoming increasingly important.
Many modern ports operate within vertically integrated groups.
The same parent company may own the shipping line, the port infrastructure, the cranes, the stevedoring operation and even the downstream haulage network.
That creates very complex questions around insurable interest and financial loss allocation.
For example, if a shiploader at one facility is damaged, could cargo simply be redirected through another terminal owned by the same group? If so, has the wider organisation genuinely suffered a loss of revenue?
These questions become particularly important in business interruption claims because insurers need to understand whether losses have genuinely occurred or whether they’ve effectively been absorbed elsewhere within the group structure.
You mentioned wording complexity. Is there a standard market approach for these projects?
Not really, and that’s part of the challenge.
Historically there were specialist operational port and terminal wordings such as Wavelength, but those are less commonly used today.
That means gaps in coverage can arise quite easily if wordings are not tailored properly to the specific operational and contractual structure of the risk. Definitions around marine perils, pollution, normal action of the sea, temporary works and delay exposures all require careful consideration.
What are underwriters focusing on most closely today?
The fundamentals remain extremely important.
Underwriters want detailed geotechnical and hydrogeological information, strong contractor experience, clear weather protocols and robust environmental management procedures.
But increasingly, they also want clarity around operational resilience and contractual allocation of risk, such as “How quickly can equipment be replaced?” or “What shutdown thresholds exist for severe weather?” or indeed “How are environmental liabilities allocated?”
They also want to understand, particularly for underwater structures requiring piling, the contractor’s procedures for pile installation, monitoring and repair during construction, as these can vary significantly depending on water conditions, seabed environment and repair methodology.
In the case of new piling works, underwriters increasingly expect contractors to deploy appropriate inspection and monitoring technologies, including sonic testing, electronic monitoring systems, dive teams and remote submersibles capable of identifying cracking or curing defects at an early stage.
While many minor pile defects can be managed through routine inspection and maintenance, more significant structural remediation on operational marine assets can become highly complex and expensive. As a result, underwriters are also focused on whether owners and operators possess the in-house expertise, inspection regimes and contractor access necessary to identify and respond to developing issues before they escalate.
Finally, what’s the biggest misconception around wet civils insurance?
Probably that the biggest risk is the visible structure itself.
In reality, the most severe losses often emerge from uncertainty beneath the waterline, whether that’s ground conditions, underwater structural defects, environmental liabilities or operational interdependencies that only become fully apparent after a loss occurs.
The projects that perform best from an insurance perspective are usually the ones that define those risks early, assess the engineering considerations and construction/operational mitigations in place, and ensure the legal and insurance disciplines are clearly defined and established from the outset.
That’s becoming increasingly important as climate volatility and infrastructure complexity continue to evolve together.