Builder's Risk Insurance For Oil, Gas, and Energy Businesses

In the dynamic and often unpredictable world of oil, gas, and energy infrastructure projects, securing the right insurance coverage is crucial. Builder's risk insurance, a specialized form of property insurance, plays a vital role in protecting these complex construction projects from financial losses due to damage or unforeseen events. As the global engineering insurance market is projected to nearly double from $24.1 billion in 2022 to $56.7 billion by 2032, growing at a robust CAGR of 9.2%, understanding builder's risk insurance has never been more important for stakeholders in the energy sector. Allied Market Research highlights this significant market growth, underscoring the increasing demand for comprehensive insurance solutions.

This article delves into everything oil, gas, and energy businesses need to know about builder's risk insurance, from its core benefits and coverage specifics to the evolving challenges and recent industry developments shaping this essential risk management tool.

Builder's risk insurance, also known as course of construction insurance, is designed to cover buildings, structures, and materials during the construction phase. For oil, gas, and energy projects, which often involve large-scale, high-value infrastructure such as pipelines, refineries, and power plants, this coverage is indispensable.

Unlike standard property insurance, builder's risk policies protect against risks that are unique to construction sites. These include damage from fire, theft, vandalism, weather events, and accidental damage during construction. Given the complexity and scale of energy projects, the financial stakes are high, and builder's risk insurance helps mitigate potential losses that could delay or derail critical infrastructure development.

In fact, builder's risk insurance currently covers 89% of US construction projects as of 2025, reflecting a 4% increase from the previous year due to broader demand for comprehensive protection. This trend is especially relevant for the energy sector, where project delays or damage can have cascading effects on supply chains and operational timelines. CoinLaw reports this growing adoption, highlighting the sector's increasing risk awareness.

Coverage Specifics for Oil, Gas, and Energy Projects

Builder's risk insurance policies for energy projects typically cover:

• Physical loss or damage to the project site, including materials, equipment, and temporary structures.
• Costs related to delays caused by insured damages, often referred to as delay in start-up or soft costs coverage.
• Protection against natural catastrophes such as storms or floods, which are particularly relevant given the increasing frequency of such events.

However, these policies usually exclude coverage for faulty workmanship or design errors, which must be addressed through other forms of insurance or contractual risk management. Additionally, it is important for project managers and stakeholders to understand the specific terms and conditions of their builder's risk policy, as coverage can vary significantly between insurers. This includes being aware of the duration of coverage, which typically lasts until the project is completed and ready for use, or until it is occupied by the owner. This timeline is crucial, as any lapse in coverage during the transition from construction to operational phases can expose the project to significant financial risk.

Moreover, the increasing complexity of energy projects, especially with the integration of renewable energy sources, adds another layer of risk that builder's risk insurance must address. As projects become more innovative, involving advanced technologies and materials, the potential for unforeseen issues rises. Insurers are now adapting their policies to reflect these changes, offering tailored solutions that cater to the unique challenges faced by modern energy projects. This evolution in coverage not only helps protect investments but also encourages the adoption of cutting-edge technologies that can drive the industry forward.

The oil, gas, and energy industries face unique challenges when it comes to builder's risk insurance. The unpredictability of workforce availability, fluctuating material costs, and complex jobsite logistics all contribute to an environment where risk assessment and pricing are increasingly difficult.

Brady Thomas, Assistant Vice President and Inland Marine Regional Underwriting Manager at Munich Re Specialty, emphasizes this complexity: "The unpredictability stretches across critical components: workforce availability, material costs, jobsite logistics, and pricing models. These are going to take a lot of insurers, a lot of money, and a lot of investments." Munich Re Specialty highlights how these factors complicate underwriting and risk management for builder's risk insurance.

Additionally, the energy sector is grappling with the impact of natural disasters. In 2023, global insured losses from natural catastrophes reached an estimated $123 billion, marking the fourth consecutive year with losses exceeding $100 billion. This trend puts additional pressure on insurers and project owners to secure robust coverage that can withstand such events. Alera Group’s 2024 Property and Casualty Market Outlook underscores the growing importance of catastrophe resilience in construction insurance.

Market Consolidation and Its Impact

Recent moves in the insurance market, such as Ryan Specialty's acquisition of US Assure Insurance in August 2024, signal a trend toward consolidation. This could lead to expanded product offerings and improved customer service in the builder's risk insurance space, benefiting energy businesses seeking tailored solutions. Insurance Business Review reports on how such consolidations may enhance market stability and innovation.

Moreover, the increasing complexity of energy projects, particularly those involving renewable sources, adds another layer of difficulty for insurers. Projects such as offshore wind farms or solar energy installations often require specialized knowledge and risk assessment capabilities that traditional builder's risk policies may not fully cover. This necessitates a more collaborative approach between insurers and energy companies to develop bespoke insurance solutions that address the unique risks associated with these innovative projects. As the energy sector continues to evolve, the demand for such tailored insurance products is likely to grow, pushing insurers to adapt and innovate.

Furthermore, regulatory changes and environmental considerations are reshaping the landscape for builder's risk insurance in the energy sector. Stricter environmental regulations and sustainability initiatives are prompting energy companies to invest in greener technologies, which can alter risk profiles and insurance needs. Insurers must stay abreast of these changes to provide relevant coverage that aligns with both regulatory requirements and the evolving priorities of energy companies. This dynamic interplay between regulation, innovation, and risk management will be pivotal in shaping the future of builder's risk insurance in the energy sector.

The energy sector is undergoing a significant transformation driven by the push towards net zero emissions and evolving regulatory landscapes. These changes have direct implications for builder's risk insurance.             

One notable development is the recent executive orders signed in April 2025 aimed at reviving coal production. This policy shift could encourage some insurers to re-enter the fossil fuel space, impacting risk profiles and insurance availability for related construction projects. Loren Henry, VP of Jencap’s Environmental & Energy Practice, notes this potential re-engagement of insurers with fossil fuel projects. Jencap Group provides insights into how these shifts affect insurance coverage gaps.

At the same time, the transition to renewable energy and net zero goals requires massive investments—estimated at $19 trillion by 2030. To support this, at least $10 trillion in new insurance coverage is necessary, according to a report by Howden and Boston Consulting Group. This creates both opportunities and challenges for builder's risk insurers to develop products that accommodate emerging technologies and sustainability criteria. Financial Times details the scale of insurance needed to back the energy transition.

Adapting to Emerging Risks

With the energy sector evolving rapidly, insurers and project owners must be proactive. Jeff Kaufmann, Executive Vice President and Head of Marine for MSIG USA, warns that "waiting until the last minute and expecting to secure coverage in just a couple of days is no longer feasible." This highlights the need for early risk assessment and insurance procurement to avoid costly delays and coverage gaps. Risk & Insurance emphasizes the importance of timely planning in managing emerging construction risks.

Moreover, as projects increasingly incorporate innovative technologies such as wind turbines, solar panels, and battery storage systems, the complexity of assessing risks has risen significantly. Insurers are now tasked with understanding not only the physical risks associated with these technologies but also the regulatory and environmental implications that come with them. For instance, the integration of smart grid technology necessitates a thorough evaluation of cybersecurity risks, as these systems become more interconnected and vulnerable to attacks. This multifaceted risk landscape requires insurers to collaborate closely with project developers and technology providers to ensure comprehensive coverage that addresses all potential vulnerabilities.

Furthermore, the growing emphasis on sustainability and corporate social responsibility is influencing underwriting practices. Insurers are increasingly considering the environmental impact of projects when determining premiums and coverage terms. This shift is prompting construction firms to adopt greener practices and technologies, not only to meet regulatory requirements but also to secure favorable insurance terms. As a result, the relationship between builders and insurers is evolving into a more collaborative partnership, where both parties work together to mitigate risks and promote sustainable development within the energy sector.

Given the complexity and high stakes of energy infrastructure construction, companies should adopt strategic approaches to builder's risk insurance:

1. Early Engagement with Insurers

Engaging insurance providers early in the project lifecycle allows for thorough risk evaluation and tailored policy design. Early discussions help address unique project risks, such as environmental exposures or specialized equipment needs, ensuring comprehensive coverage. By initiating these conversations at the planning stage, companies can also benefit from insurers' insights into emerging risks and innovative coverage options that may not be available later in the project.

2. Comprehensive Risk Assessment

Conducting detailed risk assessments that consider natural disaster exposure, supply chain vulnerabilities, and workforce challenges is critical. This informs policy limits, deductibles, and endorsements that align with project specifics. Additionally, incorporating advanced analytics and modeling tools can enhance the accuracy of these assessments, allowing companies to foresee potential disruptions and implement mitigation strategies proactively. Such thorough evaluations not only protect the project but can also lead to more favorable insurance premiums.

3. Monitoring Regulatory and Market Changes

Staying informed about regulatory shifts, such as the recent coal production revival orders, and market trends like insurance market consolidation, enables businesses to anticipate coverage availability and cost fluctuations. Furthermore, understanding the implications of new environmental regulations or sustainability initiatives can guide companies in aligning their insurance needs with broader industry standards, which may enhance their reputation and attract investment. Regularly attending industry conferences and engaging with regulatory bodies can provide valuable insights into these evolving landscapes.

4. Leveraging Specialized Brokers and Consultants

Working with brokers experienced in energy sector insurance can facilitate access to niche products and negotiate favorable terms. Their expertise is invaluable in navigating the complex underwriting landscape. These specialists often have established relationships with insurers that can lead to better pricing and terms, as well as access to exclusive coverage options. Moreover, they can provide ongoing support throughout the project, ensuring that any changes in scope or risk profile are promptly addressed, thus maintaining adequate coverage at all times.

Builder's risk insurance is a cornerstone of risk management for oil, gas, and energy construction projects. As the sector faces increasing challenges—from market unpredictability and natural catastrophes to regulatory shifts and the energy transition—having robust and tailored builder's risk coverage is essential.

With the global engineering insurance market expanding rapidly and innovations in insurance offerings emerging through market consolidation, energy businesses have more options than ever to protect their investments. However, success depends on proactive planning, early insurer engagement, and staying abreast of industry developments.

By understanding the nuances of builder's risk insurance and adopting best practices, oil, gas, and energy companies can safeguard their projects against unforeseen setbacks, ensuring smoother construction timelines and greater financial security in an evolving energy landscape.