7 October 2025
HVDC Infrastructure: Turbocharging Insurance Market Access Through Risk Management
As the world shifts towards sustainable energy solutions, High-Voltage Direct Current (HVDC) infrastructure has emerged as a pivotal component in achieving grid resilience, supporting the integration of renewable energy sources and smart grids.
The global energy landscape is experiencing a decisive shift characterised by three primary trends: decarbonisation, decentralisation, and digitisation. While decarbonisation involves reducing carbon emissions to combat climate change, decentralisation is the shift from centralised power systems to more distributed energy sources. Digitisation, on the other hand, refers to the integration of digital technologies to enhance efficiency and management.
HVDC interconnectors play a crucial role in this transition by enabling efficient long-distance transmission of electricity, supporting the integration of renewable energy sources, and facilitating the development of smart grids. These connectors are essential for facilitating transnational power flow, strengthening grid resilience, and supporting energy arbitrage across regions.
This push towards long-distance energy transmission is a part of a wider regulatory movement to optimise energy transmission. The biggest drivers of this are climate-focused policies like the EU Green Deal and REPowerEU, which invest in cleaner infrastructure and encourage companies to cut emissions through sustainability and net-zero goals.
As this infrastructure scales globally, managing risks and operational efficiency becomes a critical strategic concern for industry stakeholders. Alongside its promise, HVDC interconnectors introduce a complex risk profile, and understanding this is essential to ensure performance and bankability at scale.
Gallagher has created a tailored HVDC insurance facility that offers interconnector clients seamless access to market capacity, addressing critical operational needs. Our solution empowers firms to thrive in the expanding interconnected energy network by revolutionising their participation in the dynamic and cyclical industrial insurance risk transfer market. Whether for Development or Operational phases, we ensure seamless, efficient, and reliable market access.
Strategic Risk considerations in HVDC infrastructure development
Buried beneath oceans and transversing international borders, HVDC transmission systems carry multiple development and operational complexities that can affect project performance, bankability and insurability.
For interconnector clients looking to optimise their market participation, understanding and mitigating these risks is fundamental to maintaining a competitive advantage.
Operational risks of subsea cables
Subsea HVDC cables remain vulnerable to high impact external risks despite advanced modern system and cable designs. Nearly 70% of all power cable failures are attributable to human maritime activities, with fishing trawlers and dropped anchors being the most frequent culprits. Cables buried in the seabed may also become exposed due to shifting sediments leaving them vulnerable to external third party damage as well as wear and tear due to the action of subsea currents.
These operational disruptions can significantly impact the availability of affordable insurance offerings with suitably broad cover, making automatic capacity allocation systems essential for maintaining consistent energy flow and market participation during periods of uncertainty.
Evolving geopolitical risks
The cross-border nature of HVDC introduces a layer of dynamic regulatory fragility. Evolving market access rules, fluctuating trade tariffs and inconsistent grid codes are crucial concerns and can delay operations. Case in point, the UK-Germany Neuconnect interconnector cables faced considerable delays in finalising regulatory frameworks and qualification for EU funding post-Brexit. Meanwhile, public opposition has delayed projects like the France-Spain interconnector, valued at EUR3 billion, citing land-use concerns.
Against an increasingly unsettled geopolitical backdrop, intentional sabotage is becoming more commonplace. Nord Stream and Baltic connector incidents, widely theorised to be deliberate attacks, led to combined claims and litigations exceeding USD500 million — a precedent highlighting the future vulnerabilities of transnational energy links.
Supply chain challenges
Supply chain concerns are gradually emerging as a primary concern for HVDC projects. While such projects require specific marine technology, installation and expertise, there are limited suppliers to fulfil these requirements, particularly for subsea cables and converters. The legacy of pandemic-led disruption and the more recent impact of tariffs have had an inflationary effect on the cost of materials, both of which cause significant delays in setup. Component failures can also be detrimental for operations, owing to diminishing guarantees for quality and repair-focused service commitments.
Cyber risks
As HVDC cable systems attain improved digitisation, their cyber vulnerabilities increase. Integration with national grids makes them especially susceptible to being caught in the crossfire of a coordinated digital attack. Regulatory pressures that introduce penalties for cyber-induced operational disruptions, such as NIS2 in the EU, also raise the stakes for digital resilience across interconnectors.
“HVDC systems provide greater energy security during a time when many are striving for greener solutions. However, sabotage and terrorism are fast becoming the most pressing concerns in the market at the moment. Sometimes, the best approach to mitigate these upcoming risks is to couple a dedicated terrorism insurance with your routine insurance, to ensure optimal cost and coverage.”
Ian Picton, Head of Energy Transition, Energy, Power & Renewables, Gallagher Specialty
Insurance as a lever for bankability
The capital-intensive nature of the cables, combined with their long project cycles and exposure to multi-dimensional risks, is among the barriers to entry in the deployment of HVDC projects. As these projects scale in size, complexity and geographical reach, sophisticated risk management strategies are emerging as competitive differentiators in the market.
One of the main benefits our facility offers is helping interconnector clients connect to energy markets automatically. This means they can respond more quickly to available opportunities without having to manage everything manually. It saves time, reduces risk and improves reliability. For sponsors, developers and transmission system operators alike, this automated approach is becoming a vital component in meeting lender expectations, syndicating operational risks and lowering the overall capital cost.
We have collaborated with leading operators to develop a robust and comprehensive risk management framework. Leveraging automated capacity, we provide tailored and highly competitive solutions. These frameworks typically include automated market capacity allocation, advanced risk assessment protocols and strategic partnership development.
Considerations for insureds
Owing to increasing material costs and inflation, leading operators are adopting multi-year strategic reviews to ensure their risk management frameworks remain aligned with evolving market conditions.
Accurately calculating your estimated maximum loss (EML) using realistic assumptions is essential to showing a clear understanding of the risk, and to securing the right protection measures and fair insurance premiums.
Balancing risk and resilience in HVDC undertakings
The organisations that successfully navigate these complex risk environments will likely emerge as the defining players in the next generation of energy infrastructure. As businesses maneuver through this rapidly changing landscape, there is a significant opportunity to take a lead in this exciting and growing sector.
Gallagher Specialty stands at the intersection of energy, insurance, and investment, offering specialist risk financing and insights to enable your contribution towards building the grid of the future - one connection at a time. Our specialised HVDC insurance facility represents a new paradigm in how energy companies can enhance their success through a reduction in the total cost of risk financing in the growing interconnected energy network. By providing automatic market access capabilities alongside comprehensive risk management, Gallagher enables clients to focus on their core operations whilst maintaining optimal market positioning.
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