What underwriters look for in hydropower construction projects: insights from recent APAC placements

Over the last few years, Aon has supported a range of hydropower construction projects across APAC. Each project has been different, but a clear pattern has emerged: underwriters tend to focus on the same core questions.

For developers, lenders and even some engineers, these questions can feel like obstacles. From an insurance perspective, they function as early warning signals. Addressed early, they can help reduce the risk of delays, budget overruns or even failure to reach financial close.

This article sets out recurring themes observed when presenting hydropower risks to Construction All Risks underwriters – and what they mean for project stakeholders.

1. The fundamentals: water, rock and weather

a) Hydrological data: more than a “nice to have”

Hydropower performance depends on the underlying water resource, so underwriters are particularly cautious about the quality and duration of hydrological data used in the feasibility study.

They typically look for:

• At least 20 years of hydrological records
• Clear explanations for gaps, short time series or reliance on distant gauging stations
• Transparent methodology for deriving design floods and flow duration curves

From an insurance standpoint, weak hydrological data affects more than revenue projections. It raises concerns about spillway design, flood risk and the overall reliability of the project.

b) Geological conditions: invisible risks with big consequences

Detailed geological and geotechnical surveys are another major focus area.

Underwriters expect to see:

• Clear identification of faults, weak rock formations and complex ground conditions
• How these conditions are reflected in design choices and construction methods
• Defined risk management protocols for unexpected ground conditions, including how they are allowed for in the project schedule and budget

When these aspects are well documented and openly addressed, they reinforce confidence in the project’s technical integrity and constructability.

c) Weather, monsoons and climate change

In regions where the monsoon is a defining characteristic, managing seasonal variability becomes critical.

Underwriters focus on:

• How construction activities are phased around the monsoon season
• Flood protection measures during construction (e.g. temporary works, diversion tunnels, cofferdams)
• How past extreme events have informed the design

They also increasingly ask how climate change has been incorporated into project planning. At Aon, specialised climate teams can perform site-specific climate risk assessments and impact of future conditions. This enables a clear explanation to insurers of how future rainfall patterns and extreme events (such as flood, drought or wildfire) might affect the asset over its lifetime.

2. Construction risk hotspots

a) Cofferdam design and construction methodology

From an underwriting standpoint, the cofferdam is a critical risk point during river diversion and the early stages of construction.

Key questions include:

• Is the cofferdam designed for realistic flood scenarios during the construction window?
• Which standards and design codes have been followed?
• What contingency plans are in place if an extreme flood occurs earlier than anticipated?

A failure at this stage can lead to significant physical damage and Delay in Start-Up (DSU) claims. As a result, markets scrutinise these details closely.

b) Tunnelling works: method statements matter

Where a project includes tunnels (such as headrace or diversion tunnels), underwriters expect a high level of technical detail.

They look for:

• Excavation methods and sequencing
• Use of explosives and associated risk controls
• Ground support systems and monitoring regimes
• Contingency plans for water ingress or unstable ground

Robust method statements and geotechnical baseline reports help demonstrate that tunnelling risks are well understood, monitored and proactively managed.

c) Access roads and landslides

In hilly or mountainous terrain, a significant share of losses can occur before reaching the dam site.

Common issues include:

• Slope failures and landslides along access roads
• Inadequate slope protection or drainage design
• Damage to temporary works and disruption to logistics

Underwriters therefore pay close attention to slope protection measures, drainage design and geotechnical assessments along access routes, not only at the main works.

d) The EPC contractor and project partners

The identity and track record of the EPC contractor and key project partners are major underwriting considerations.

Underwriters want to understand:

• Whether the EPC has a demonstrable track record in hydropower
• The strength of its internal risk management and safety culture
• Performance on previous projects, including claims history and delivery against schedule and budget

A credible EPC with robust processes significantly increases underwriting confidence and can broaden market appetite.

3. Environmental, Social, and Governance

a) Land acquisition: the “hidden” risk along transmission lines

Experience shows that some of the most challenging land issues may not be at the reservoir itself, but along the transmission line corridor.

Land acquisition challenges can be a significant driver of delay and social unrest. Underwriters therefore focus on how these risks are identified and managed, particularly outside the impounded area where impacts are more dispersed and politically sensitive.

b) Social impact and community opposition

Hydropower projects routinely raise questions about resettlement and community impact.

Typical areas of underwriting focus include:

• Whether villages or communities need to be relocated
• How compensation, livelihoods and consultation processes are being managed
• The realistic risk of opposition from local groups or NGOs that could delay, modify or disrupt the project

While these may be framed as “ESG questions”, they are central to project timelines and stability, and therefore to delay and political risk.

c) Environmental approvals

For international insurance markets, ESG and environmental considerations are now central to participation.

Underwriters typically review:

• The existence and quality of fauna and flora studies
• The scope and robustness of the Environmental and Social Impact Assessment (ESIA)
• Alignment with international ESG frameworks and lenders’ standards
• Timelines for environmental approvals and clearances

In practice, obtaining ESG clearance from some markets can take several months. When these processes are well advanced and clearly documented, they tend to accelerate the underwriting process and reduce the risk of late-stage surprises during placement.

4. Where the broker adds value

Taken together, these themes show that underwriters are not just insuring a construction site. They are insuring a complex interaction of hydrology, geology, engineering, climate, communities and governance.

A specialist broker adds value by:

• Translating technical complexity into a clear, candid risk narrative that insurers can understand and price
• Coordinating experts – from climate specialists to engineers and consultants – to build a consistent story about how risks are identified, quantified and managed
• Helping sponsors and lenders prepare “underwriter-ready” documentation early, so insurance supports the critical path rather than delaying it
• Navigating international and regional markets to structure an efficient, well-aligned insurance programme

When engaged early, the broking team can often identify gaps in data, design information or ESG documentation before they become obstacles to placement or financial close.

Positioning insurance as an enabler

Hydropower is expected to remain an important component of the energy transition, particularly in emerging markets. These projects are technically complex, capital intensive and exposed to a wide range of physical, social and political risks.

For underwriters, this justifies tough questions on hydrology, geology, design, construction methodology, land acquisition and ESG. For project sponsors, the process can be demanding, but it supports the development of projects that are technically robust, socially acceptable and financially resilient.

When these discussions start early, insurance can act as a strategic enabler rather than an afterthought. Early, open engagement with underwriters and advisers can help de-risk projects, align stakeholders and support both access to capacity and long-term asset performance.

For organisations involved in hydropower – whether as developers, lenders, engineers or contractors – there is clear value in reassessing how these risks are evolving, particularly in the context of climate change and rising ESG expectations, and in ensuring that insurance is integrated into decision-making from the outset.

To explore how Aon supports hydropower and other power and renewable energy projects – from construction through to operation – visit our Power Insurance and Risk Management | Aon page or contact us to discuss your next project.

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