No room left – competition for space generates infrastructure accumulation risks

The race for space is on, off- and onshore. The expectation is that by 2050, the physical surface ground area required to build and operate marine aquaculture, and offshore wind and oil & gas infrastructure, will increase fivefold. Not included in this estimate is the space needed for structures that protect the natural environment and support the tourism industry. Also not included are floating solar farms, desalination and wave & tidal energy plants, submarine cables, pipelines, seabed mining equipment and installations used for military purposes.³

Near-shore, where today most damage events happen, will become especially crowded.⁴ Having more infrastructure in the same marine space heightens the risk of damage to different installations. This includes potential for third-party damage and cascading effects, when one specific installation connects to one or more other networks.⁵

For example, power and data networks. If part of a system fails, the energy traffic is normally routed to other parts of the network. If too much power flow goes to one network, the latter can become overloaded and fail, which in turn could render an entire network obsolete until repair work is completed. Note too that two separate infrastructure installations can be mutually complementary. Hence, for instance, without power data networks don’t work. And if data networks don’t work, the ability to communicate notice of failure and restore power can be compromised.⁶

Networks – whether for communications installations, wind farms or other – need space, not just for physical installations but also for the establishment of buffer protection zones.⁷ In New Zealand, for instance, buffer zones protect the country’s undersea electricity, communications and energy cables.⁸ Likewise in Europe, for various kinds of infrastructure.⁹ This means that the actual footprint of infrastructure is larger than that of a physical installation itself. In addition, national security considerations and schemes to protect nature may limit how close to the coastline networks can be built, meaning further competition for space. The combination of such buffer zones often squeezes certain infrastructure assets into the remaining small areas. With no buffer zones, it could happen that several of those installations suffer damage or outage at the same time, whether due to intentional or unintentional action, or natural peril events.

Policymakers have recognised this and in many parts of the world, including the EU and the US, regulations on the use and protection of space for marine infrastructure are currently under review.¹⁰ Infrastructure accumulation risk can also build in onshore locations. Typically, however, these are of lesser scale as applicable laws are country specific. In maritime locations, infrastructure networks can cross international sea borders. To adhere to the regulations of different jurisdictions can make projects more complex to manage and operate. That a large share of critical infrastructure is privately owned heightens the challenge of managing the accumulation risk, as different parties need to coordinate their respective activities.

In addition, critical energy and communication networks are of high strategic interest economically and militarily, and are thus potential targets for hostile attack. The closer together the network installations are, the more attractive they are as a target for a hostile agent, as a pre-meditated action could compromise several assets in one hit.

When providing coverage for infrastructure assets, insurers should keep in mind that property and business interruption losses can originate from different sources, be those natural catastrophes, human interference or cyberattacks. Especially exposed are chokepoints where sub-sea cables and other infrastructure assets connect to land.