The cost of failure is not the cost of repair
When a submarine cable fails, the immediate response is understandably technical. The fault must be located, the damage assessed, and a plan developed to restore the system to service.
For those responsible for the investment, however, the more consequential question may be different.
How much will the failure ultimately cost, and how much of that cost can the investment withstand?
Submarine cables underpin two economically significant industries: offshore renewable energy and international telecommunications. Both depend upon infrastructure that is expensive to install, difficult to access and exposed to operational risks throughout its service life.
Yet the financial consequences of failure are rarely confined to the replacement of damaged equipment.
A relatively modest physical defect can interrupt revenue, create additional operating expenditure, trigger contractual obligations and expose weaknesses in financing or insurance arrangements. The economic consequences may continue well beyond the completion of the physical repair.
For owners, insurers, lenders and infrastructure investors, this raises an important distinction in that a cable may be technically repairable without its failure being financially inconsequential.
Understanding that distinction should be fundamental to the assessment of subsea infrastructure investments.
The growing significance of consequential loss
In March 2026, AXIS Capital published an analysis of offshore wind insurance claims recorded between January 2021 and September 2025. Within its own claims portfolio, export cable incidents represented approximately 6% of claims by number but carried the highest average incurred claim value, at US$18.8 million. Inter-array cable incidents represented approximately 14% of claims, averaging US$6.7 million [1].
These figures represent the insurer's incurred claims experience, not the physical replacement cost of the damaged cables. AXIS identifies lost generation and consequential business interruption as important contributors to export cable claim severity [1].
The published headline figures do not provide a complete itemised breakdown of individual cost components. Nevertheless, they demonstrate why the financial consequences of cable failure cannot be evaluated through repair expenditure alone.
For an infrastructure investor, the distinction is fundamental: the cost of restoring an asset and the economic consequences of its unavailability are not necessarily comparable.
The interruption of electricity generation, particularly where export capacity is constrained, can accumulate financial losses while the asset remains unavailable.
Insurance may transfer some of that exposure, but coverage is subject to the policy terms, deductibles, waiting periods, indemnity limits and exclusions. Even where a substantial claim is recoverable, the timing of settlement may differ significantly from the timing of the expenditure and revenue interruption.
For a project with material debt obligations, these distinctions matter. Debt servicing, operating commitments and other financial obligations do not disappear when an asset stops generating income.
A technically successful repair may therefore still leave the owner dealing with reduced liquidity, lower investment returns or financial obligations that were not fully anticipated when the project was financed.
The issue is therefore whether the financial structure supporting the asset is sufficiently resilient to absorb the consequences of a temporary loss.
Two industries, different economic consequences
Submarine telecommunications provide an instructive comparison. International communications networks depend upon an extensive system of submarine cables. The industry has accumulated decades of experience managing cable faults, maintaining restoration capability and developing network redundancy.
However, the economic effects of telecommunications cable failure can differ substantially from those experienced by offshore energy projects.
A telecommunications cable failure does not necessarily result in the immediate loss of all the revenue associated with that cable.
Where sufficient alternative network capacity exists, traffic may be rerouted and services maintained. The physical cable can remain damaged while its economic function is partly or substantially restored through other parts of the network.
That resilience, however, is not without cost. Alternative capacity must exist, network diversity must be maintained, and commercial arrangements may be necessary to secure restoration capability. Where alternative routes are unavailable, insufficient or already congested, the consequences can extend beyond the cable owner to telecommunications operators, commercial customers and national economies.
Offshore wind faces a different challenge. Electricity generation cannot always be redirected around damaged export infrastructure in the same manner as digital traffic. The financial effects depend upon the electrical configuration, spare transmission capacity, contractual arrangements and proportion of generation affected.
There are also distinctions between the owner of a generation asset and the owner of the transmission infrastructure. The party experiencing lost production may not be the party responsible for the failed equipment.
Despite their different commercial structures, both industries face the same underlying investment question: How much economic value is exposed when a critical subsea asset becomes unavailable?
Importantly, the answer cannot be derived from the physical replacement cost alone.
When time becomes the dominant financial variable
One of the least appreciated characteristics of subsea cable failure is that the duration of the financial disruption may be considerably longer than the physical repair activity itself.
The International Cable Protection Committee's 2026 analysis of telecommunications cable repairs carried out during 2025 recorded a global average of 23.4 days between fault notification and repair vessel departure, followed by an average vessel transit time of 7.7 days [2]. These are response intervals, not total time to restore service.
These averages, however, conceal significant geographical differences.
Established maintenance arrangements and more efficient regulatory processes can enable faster responses in certain European jurisdictions. An April 2025 UK parliamentary answer cited emergency telecommunications cable repair times of approximately 5–7 days in the UK [3]. This is a different measure from the ICPC notification-to-departure and transit intervals, and the figures should not be directly compared.
Consequently, global averages should not be treated as representative of individual assets or geographic regions.
For investors, this variation is itself significant. Two otherwise comparable submarine cable investments could carry materially different financial exposures simply because their expected restoration periods, regulatory environments and available recovery arrangements differ.
The location of an asset can therefore influence not only the operational consequences of failure but also its financial resilience and investment attractiveness. Where differences in recovery exposure cannot be adequately mitigated or transferred, investors may seek compensation through pricing, contingency provisions or a higher required return.
The significance for investors is not the specific duration observed in telecommunications. It is the uncertainty that surrounds the restoration process. An incident may require relatively limited physical intervention but still experience extended delays before service can be restored.
For an offshore wind project, such delays may result in lost generation revenue and additional contractual or financial liabilities.
For a telecommunications business, the financial exposure might instead arise from the cost of securing alternative capacity, service-level obligations, reduced network availability or an inability to fulfil commercial commitments.
The relationship between outage duration and financial loss is not necessarily linear. Redundancy, insurance, contractual thresholds and operational arrangements can produce very different financial outcomes as an outage extends.
A short interruption may be absorbed within normal operating provisions. A longer disruption may exhaust contingencies, trigger additional contractual liabilities or expose the investor to costs that were previously regarded as remote.
Accordingly, the restoration date should not be treated as a single fixed assumption within an investment model.
It should be considered as a range of credible outcomes, with the financial consequences assessed against each.
Who carries the loss?
An additional complication is that the financial consequences of a cable failure are not necessarily borne by the organisation responsible for the damaged asset.
Consider an offshore wind development in which generation, transmission, construction, maintenance and insurance obligations are distributed among several parties.
The owner of the cable may face direct repair costs. The generator may experience lost production. An insurer may carry part of the insured exposure, while contractors may face liabilities subject to contractual provisions and limitations.
In some circumstances, contractual compensation or recovery mechanisms may redistribute elements of the loss and in others, losses may remain with parties that have limited practical influence over restoration activities.
Telecommunications infrastructure can present equally complex arrangements, particularly where cable ownership, capacity rights, network operation and customer commitments are separated.
This raises a question of relevance to investment due diligence: does the contractual allocation of risk reflect the actual economic exposure of the parties involved?
A contract may identify who is responsible for performing a repair or contributing to its cost without fully resolving who ultimately suffers the commercial consequences of prolonged interruption.
Similarly, the existence of insurance does not establish that every party experiencing a financial loss is adequately protected.
From an investment perspective, it is therefore necessary to distinguish between:
· The total economic loss created by an incident.
· The contractual allocation of that loss.
· The proportion recoverable through insurance or other arrangements.
· The residual financial exposure retained by each affected party.
These distinctions are particularly important where infrastructure ownership and revenue generation are separated.
The financial resilience of the investment depends not merely upon identifying the responsible party, but upon understanding whether that party has the resources and contractual obligations necessary to meet the resulting exposure.
The limitations of insurance as a financial safeguard
Insurance plays an essential role in financing and operating subsea infrastructure. It provides an important means of transferring defined risks and limiting the financial consequences of certain events. It does not, however, remove the underlying economic uncertainty.
The terms of insurance differ in the losses covered, the circumstances under which cover applies and the point at which compensation becomes payable.
For example, physical damage cover and business interruption cover address different aspects of a loss. Waiting periods, deductibles, indemnity periods, policy limits and exclusions may substantially affect the final financial outcome.
Insurance recovery does not necessarily resolve immediate cash-flow pressures. An insured loss is not the same as immediately available liquidity.
An asset owner may need to fund emergency activities, meet operating commitments or support debt obligations while a claim is assessed. Interim insurance payments may be available, but their timing and amount depend on the policy and claims process.
There is also a broader question concerning the value of insurance relative to preventive investment and financial contingency. An investment that appears sufficiently protected under an assumed restoration period may become significantly more exposed if that period is exceeded.
Insurance should consequently be considered as one component of financial resilience, rather than a substitute for understanding the potential consequences of infrastructure failure.
The cost of uncertainty
The financial consequences of cable failure do not begin exclusively when an incident occurs. They can also influence investment decisions before the asset is acquired, constructed or financed.
An investor considering two otherwise comparable subsea infrastructure assets may assign different values to them if one has materially greater uncertainty surrounding outage duration, lost income or financial recovery.
That uncertainty can affect the level of contingency required, the attractiveness of insurance arrangements, debt financing assumptions and the return demanded by investors.
It may also influence the purchase price that a prospective owner is prepared to offer. This is where conventional assessments of engineering reliability need to connect more directly with financial analysis.
A technically robust asset is not automatically a financially resilient investment. An asset with relatively modest failure probability may still carry significant economic exposure if the consequences of an extended interruption are severe.
Conversely, an asset facing a greater frequency of manageable incidents may present a more acceptable investment risk where financial losses are predictable, service continuity is maintained and recovery arrangements are credible.
The investment decision must therefore consider both the likelihood of failure and the distribution of its financial consequences.
Simply identifying a credible repair solution is insufficient.
An illustrative investment scenario
Consider a hypothetical offshore infrastructure asset experiencing a cable failure. Assume direct repair expenditure of £4 million and lost operating contribution of £100,000 for each day the asset remains out of service.
For simplicity, assume no offsetting insurance or contractual recoveries, no avoided operating costs beyond those already reflected in the lost-contribution figure, and a constant daily loss. These are illustrative assumptions, not observed industry averages.
Under these assumptions, the scale of the financial exposure changes materially with the duration of the interruption:
Assumed outage
Direct repair + lost contribution
Total gross exposure
30 days
£4 million + £3 million
£7 million
120 days
£4 million + £12 million
£16 million
Illustrative calculation only; excludes insurance recoveries, avoided costs, financing effects and non-linear commercial consequences.
The same physical repair therefore creates £9 million more gross financial exposure in the 120-day scenario than in the 30-day scenario. Actual outcomes would depend on the asset’s revenue profile, redundancy, contractual allocation, insurance arrangements and financing structure.
The investment model should distinguish between an expected outage and credible adverse scenarios, including the possibility that the financial consequences change sharply at contractual or insurance thresholds.
This does not require investors to assume that every cable failure will become a financial crisis.
It requires them to understand the conditions under which an otherwise manageable engineering event could become a material investment problem.
What should investors be asking?
For infrastructure investors, asset owners, insurers and lenders, the implications extend beyond conventional technical due diligence.
An assessment of subsea cable infrastructure should establish not only whether the asset has been appropriately designed, installed and maintained, but also how its financial performance could respond to a significant interruption.
Five questions deserve particular attention.
1. What is the maximum credible economic exposure?
This should include direct expenditure, revenue disruption, contractual consequences and additional financial obligations, assessed under clearly defined scenarios rather than an unsupported single worst-case figure.
2. How sensitive is that exposure to restoration duration?
The assessment should examine the relationship between time and financial loss, including the point at which insurance provisions, contractual thresholds or liquidity arrangements materially change the outcome.
3. Who is contractually responsible, and who is economically exposed?
The distribution of responsibilities should be reconciled with the actual allocation of revenue interruption, expenditure and financial liability.
4. How much of the loss is genuinely recoverable?
Insurance, contractual compensation and alternative operating arrangements should be assessed against their applicable terms, practical limitations and expected timing.
5. What does the remaining exposure mean for investment value?
The consequences should be reflected, where material, in cash-flow forecasts, downside scenarios, liquidity provisions, financing assumptions and investment returns.
These questions do not replace technical due diligence. They extend its usefulness by translating engineering and operational uncertainty into information that can inform capital allocation.
From repairability to financial resilience
Subsea cables will continue to fail.
Neither offshore wind nor international telecommunications can eliminate every operational hazard, however sophisticated the engineering or extensive the investment in infrastructure protection.
The more significant commercial question is whether the consequences of those failures are properly understood and adequately provided for.
The telecommunications sector demonstrates the value of considering service continuity and restoration arrangements as part of the economic resilience of a network.
Offshore wind highlights how the loss of critical infrastructure can create substantial consequential financial exposure, particularly where generation and export capacity are directly affected.
Both industries provide lessons for owners and investors.
Yet neither physical redundancy, technical repair capability, contractual risk allocation nor insurance protection should be mistaken for a guarantee of financial recovery.
For capital committed to long-life subsea infrastructure, failure should be assessed not simply as an engineering event, but as a potential interruption to the economic performance upon which the investment depends.
The question is no longer simply whether a submarine cable can be repaired.
It is whether the investment has been structured to withstand the financial consequences of that repair becoming necessary.
Odyssey Marine Consultants provides independent technical and commercial risk advisory services to the offshore energy, marine and subsea infrastructure sectors, connecting engineering and operational realities with the decisions of asset owners and capital providers.
Sources and further reading