14 April 2025
Land Reclamation and the Insurance Implications for Wet Works
From major airports to artificial islands, massive-scale land reclamation projects have become a phenomenon of modern cities. But they can be fraught with complexity and not without criticism.
Urbanisation and population growth are among the pressures driving demand for land in what are often already overburdened cityscapes. Around the world, cities are struggling to accommodate growing populations.
According to the UN, global urban populations will increase by two and a half billion over the next 30 years. It anticipates that 68% of the world's population will live in urban areas by 2050.
Land reclamation has long been a solution, offering space to develop outwards. The ability to build out coastlines remains an essential part of shaping tomorrow’s urban centres and infrastructure development.
Reclamation provides a blank canvas to build more modern, resilient, and sustainable cities to meet the needs of future generations. Nevertheless, reclamation works add significant additional expense and construction risk and impact the marine environment.
According to the UN, global urban populations will increase by two and a half billion over the next 30 years.
Build up or build out? When and where reclamation makes sense
Dubai's Palm Islands are often held up as a feat of modern engineering, construction and architecture. The islands have helped to boost tourism, brought investment, and fostered commerce for the United Arab Emirates city. The project, which was reported to cost in the region of USD12 billion, reclaimed 5.6 square km and is surrounded by an 11km breakwater.
Nearly 100 million m3 of calcareous sand was extracted from the seabed to carry out the reclamation project, which required seven of the world’s largest dredgers and a network of pipes to transport the sediment. A temporary dam – consisting of two 1.2-kilometre-long dykes - was also built to enable the construction of a 6-lane sea tunnel and provide a means of transporting construction vehicles.
Other major reclamation projects include the Macau International Airport and Eko Atlantic City in Lagos, Nigeria. Not all land reclamation projects are as lavish, and needs vary from place to place.
From ports and terminals to major infrastructure projects, including airport runways, bridges and tunnels, reclaiming the coast typically involves complex construction and engineering. By their nature, many power and desalination facilities require coastal locations and access to supporting infrastructure.
Large-scale land reclamation projects are becoming popular in regions that have plenty of coastline but not enough mainland to suit their needs, particularly for densely-populated regions. Faced with rising populations and a finite land mass, island nations and coastal cities are turning to land reclamation as an exercise in resilience and future proofing.
One major benefit of claiming new land from the sea is that, once settled, it offers virgin land for development without any of the legacy issues typically associated with brownfield sites.
Land reclamation costs vary considerably, depending on the nature of the project and prevailing costs for materials and workforce. During the last ten years, the costs associated with land reclamation works have risen dramatically. Inflation and the availability of specialist dredging vessels are key factors driving the overall cost of these specialist works.
Despite cost and sustainability concerns, coastal reclamation projects are underway in many parts of the world and taking place at an accelerating speed. The challenge for contractors is to meet the needs of future generations, while carefully managing the risks inherent in wet-works construction.
“Land reclamation offers an opportunity for construction companies to adopt innovative approaches in building cities and urban infrastructures on newly created land, unburdened by historical challenges. This allows them to avoid the difficulties associated with old utility connections, brownfield sites, varying ground conditions and legacy structures. The ground conditions are a known entity as they have been created for the purpose; and structures can be incorporated into the ground during these reclamation works, if necessary,” says Stuart Freeman, Partner at Gallagher.
“New, purpose-built land helps to enable the implementation of modern and sustainable design principles, allowing for the development of environmentally friendly and resilient urban spaces. With a clean slate, construction companies can incorporate cutting-edge technologies and infrastructure systems, ensuring the long-term viability and efficiency of the newly reclaimed land.”
Stuart Freeman Partner, Construction Gallagher Specialty
Four examples of modern reclamation projects
1. Ras Malé, Maldives: The largest reclamation project in the Maldives to date is Ras Malé. Expected to reclaim 11.5 kilometres of land, Ras Malé will be two meters above sea level at its edge, up to three meters above sea level in its centre and has planning for 65,000 homes.
2. Eko Atlantic City, Nigeria: In Nigeria, the Eko Atlantic City project includes an 8.5-kilometer-long sea wall, which is designed to protect Nigeria's capital from coastal erosion and rising sea levels. In addition to creating ‘The Great Wall of Lagos’, the GBP4.5 billion reclamation project will provide housing for up to 250,000 people.
3. Kau Yi Chau Islands, Hong Kong: In Hong Kong, one of the most densely populated cities on the planet, land remains a scarce and expensive commodity. Over the past century, reclamation in the territory’s harbour has created 7,000 hectares of reclaimed land, representing six percent of the city’s total available real estate. Despite the introduction of a ban on further reclamation in Victoria Harbour, a law change is under consideration. If the amendment is passed, it would remove some of the barriers and allow small-scale works to take place.
The delayed £60 billion Kau Yi Chau artificial islands project aims to create 18 square kilometres of land, with the ambition to provide up to 1.1 million new homes within dozens of high-rise buildings.
4. Landmass increase, Monaco: Monaco shares a mountainous 5.5-kilometre border with France and has 3.8 kilometers of coastline. Due to its limited space, the tiny principality had long faced the challenge of accommodating its growing affluent population and tourism demand. To address this scarcity, construction was undertaken on a USD 2.3 billion land reclamation project, which increased Monaco’s overall landmass by 20%.
Questions of sustainability and resilience
Land reclamation projects can face opposition due to concerns over the environmental impact and, in particular, disruption to coastal ecosystems.
Resilience is also a concern. As sea levels rise and weather extremes become more common, the longevity of reclaimed land could become more of an issue unless it is future-proofed.
Busan, South Korea's marine city, was mostly developed on reclaimed land. Built in the 1980s, the town is protected by a seawall, but these defences have been overcome several times by typhoons and storm surges during the past decade.
“Construction insurers have historically been able to rely on past data as a prediction for the future. But climate change is making the future much harder to predict,” says Stuart Freeman. “To address these challenges effectively, all stakeholders must remain mindful of rising sea levels and other environmental factors affected by climate change when carrying out the design for reclamation work.”
Managing risks during the construction phase
Financial constraints, poor quality of fill material, high dredging volumes, and natural perils are just some of the challenges facing contractors during the construction phase of any land reclamation project. Locations exposed to extreme weather and natural disasters face additional challenges. Projects in these areas require a preparedness plan to mitigate damage risks and ensure they are not entirely lost during a major event. Understanding common sources of loss, conducting risk assessments and following quality control procedures are important strategies in identifying, controlling and mitigating some of these risks.
Cost Overruns
Land reclamation projects are often complex and involve various factors such as engineering, construction, and environmental considerations. Unexpected delays or changes in project scope can lead to cost overruns, exceeding the initial budget.
Unforeseen Geological Conditions
The reclamation process may result in unexpected underlying geological complexities that may not at first be apparent, such as poor soil settlement. Discovering such conditions during the construction phase can result in additional costs for stabilisation measures or modifications to the original plans.
Long-term Maintenance Costs
Reclaimed land requires ongoing maintenance to ensure stability and functionality. Drainage is a major and key design factor. Project owners should consider the additional cost of erosion control, infrastructure upkeep, and environmental monitoring.
Natural Perils Versus 'Normal Action of the Sea'
(Re)insurers typically exclude damage from ‘normal action of the sea’ in wet-works construction. To agree what is normal should be a technical discussion between the insured, their broker and insurers. Selecting this threshold, and monitoring it, can pose a challenge for contractors, particularly where historical relevant data is not available on significant wave height and/or wind strength.
In parts of the world where earthquakes are a risk, the impact of ground shaking and liquefaction on reclaimed land must be factored into risk assessments.
Risks to Plant and Machinery
Land reclamation projects rely on specialist vessels and machinery. Sourcing and operating such equipment involves significant cost and expertise and requires appropriate insurance if the potential financial loss is to be protected against. The loss of a critical vessel or item of construction equipment can cause lengthy delays.
Environmental Exposures
By its very nature, reclamation work changes the marine environment in the direct vicinity of the works, but it also has the potential to affect the wider marine environment. Dredging works disturb sediment, potentially releasing harmful chemicals that have built up and reducing water oxygen levels. Depending on the site, there is also a risk of damaging or destroying fish spawning grounds.
The need for a robust insurance programme
Due to complex risks and uncertainties, land reclamation projects require all applicable project insurances to be tailored to the nuances of this sector. Failure to do so will leave gaps in the insurance programme and the potential for uninsured losses.
Risk assessments at each stage of a project and close collaboration between project stakeholders, insurers, and risk management experts can help mitigate the potential for loss and protect people, plant and machinery.
With each project bringing unique technical, engineering, and environmental aspects, it is essential to take a bespoke approach to quantifying risk and ensuring adequate protection is in place. Land reclamation is a complex and challenging sector, which exposes construction companies to various risks. This presents an opportunity for brokers to assist construction companies in understanding how these risks translate into the insurance programme; what levels of cover are available for these risks – are they specialist products which need a nuanced approach? Or is no insurance available at all?
“Insuring wet works poses significant challenges as insurers are wary of the associated risks,” explains Gallagher’s Stuart Freeman. “This limits the pool of insurers available to lead any major marine infrastructure risks and hence reduces competition in this sector. However, these key underwriters are generally receptive to technical engineering arguments, so the key to obtaining the best terms from the insurance market is going armed with the right engineering detail.”
The future of land reclamation
Land reclamation is inherently complex and expensive for urban planners seeking expansion. Faced with the decision to build up or build out, many growing cities will continue to consider the merits of reclaiming new land in the sea, particularly where other development solutions are unavailable and cities are reaching bursting point.
In the future, opportunities to reclaim land will continue to be weighed carefully against potential downsides, while factoring in growing resilience and sustainability requirements.
Going forward, it is likely that more advanced technology and construction methods will help to better monitor the impact of reclamation, while better anticipating potential threats throughout the lifecycle of a project although climate change may continue to impact this.
Presented with the right locations and a proactive approach to risk management, future projects should offer numerous benefits, including precious real estate, a blank canvas for new developments and custom-designed protection from coastal forces and environments in which future communities can thrive.
Key to achieving this will be close and meaningful collaboration between major stakeholders and a sophisticated approach to understanding and mitigating sources of risk. In the landscape of future cities, striking the right balance between economic opportunities and environmental impact will be crucial to the success of land reclamation projects.
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