Bridging the Gap: Solutions for Managing Construction-to-Operation Transition Risk

Bridging the Gap: Solutions for Managing Construction-to-Operation Transition Risk
May 4, 2026 11 mins

Bridging the Gap: Solutions for Managing Construction-to-Operation Transition Risk

Bridging the Gap: Solutions for Managing Construction-to-Operation Transition Risk

Construction-to-operation transitions are rarely seamless. Without clear responsibilities, precise handover definitions and aligned insurance structures, critical risks can fall through the cracks — but early coordination can help.

Key Takeaways
  1. Tight timelines, soaring project values and phased handovers have raised the stakes for construction-to-operation risk management.
  2. Misaligned contracts and insurance structures create gray zones — where undefined milestones, ambiguous ownership and vague policy wording can leave critical assets uninsured.
  3. Defining responsibilities and handover triggers from day one — and aligning insurance programs to real-world project phasing — helps ensure a smoother transition and reduces the likelihood of costly disputes.

As energy, high-tech and infrastructure projects grow in scale and sophistication, the shift from construction to operation has never been more complex.

Phased commissioning, overlapping workstreams and increasingly intricate systems mean there is rarely a single, clean handover moment. Instead, projects move through a series of transitional states where construction activity, testing, commissioning and early operations coexist.

It is at these pressure points that risk accumulates — and where unclear definitions, misaligned insurance programs and blurred ownership can often lead to disputes.

Insurance gaps most commonly emerge when construction and operational exposures overlap, but coverage does not. This usually occurs when:

  1. Construction, testing and commissioning, handover and early operations overlap
  2. Construction all risks (CAR), delay in startup (DSU), business interruption (BI) and operational property programs don't reflect real-world project phasing

The result is costly ambiguity: CAR cover stops once operations begin, but property insurers may decline to respond until provisional or substantial completion is formally achieved. Without deliberate coordination, revenue generating assets can sit in a coverage gap at the very moment exposure is highest.

Industry Snapshots: Construction-to-Operation Transition Risks by Sector

Industry experience shows that construction-to-operation transition risk is most acute in sectors where asset values are high, systems are tightly integrated and commissioning occurs under time pressure.

  • Digital Infrastructure: Soaring asset values, dense equipment configurations and early energization create heightened exposure during the transition to operation for data centers. Risk often concentrates around commissioning and power-up phases, when responsibility for equipment, data halls and supporting infrastructure may be unclear. If insurers and project stakeholders do not have a shared understanding of what assets are onsite, operational and revenue losses can escalate rapidly beyond initial loss assumptions.
  • Renewable Energy: Offshore and onshore renewable projects rely on tightly integrated systems, making handover errors particularly costly. Any installation or commissioning defaults during the transition window can trigger multi-million-dollar DSU claims. For wind farms, failures at substations or grid connection points can affect both completed and still-under-construction assets.
  • Civil Infrastructure: In tunneling and major transport projects, such as subway or metro systems, the testing period covers all integrated systems, including the rolling stock. Separating these elements into different contracts can create uncertainty over which party is responsible for testing and commissioning. Without clearly defined phase boundaries, incidents can quickly escalate into disputes over liability, insurance coverage and project delays.

The bottom line: Stakeholders should assess construction-to-operation transition risks pre-design, clarify contractual milestones with precision, align every party involved and ensure insurance programs reflect how the project will eventually be built and brought online.

Once responsibilities, milestones and risk allocations are fixed, insurance alone cannot correct structural gaps.

3.3%

Global construction output is expected to increase 3.3% year-on-year in 2026. Large manufacturing, natural resources and civil engineering projects across regions are driving the growth.

Source: Atradius

Quote icon

If you don’t identify the risks at project outset, you can’t apportion them — nor can you say if a risk is construction, operational or transition-related.

Milos Obradovic
Placement Director, Construction, Australia

Why Transition Risk is on the Rise

  • 01
    Increasing Project Complexity

    Projects like data centers, battery plants, semiconductor fabs and EV manufacturing involve multi-phased, multi-year handovers across different parts of sites.

  • 02
    Infrastructure Dependencies

    Power grids, roads and water lines can impact project delivery and performance, especially for large-scale manufacturing and data center campuses.

  • 03
    Early Occupation

    Facilities may start partial operations before completion, with some lines live while others are still under construction. Incidents in construction zones can affect live equipment, triggering outages, BI coverage and SLA penalties.

  • 04
    Expanded Stakeholder Ecosystems

    Complex projects today involve global supply chains, multiple contractors, specialized commissioning teams and tenant-specific fitouts. A delay in one node can cascade.

5 Reasons Handovers Can Fail

The challenge: Construction-to-operation handover failures arise when contracts don’t clearly delineate risks, ownership and timelines — creating costly ambiguity just as a project is going live.

Key pain points include:

  • Ambiguous Responsibility and Risk Ownership

    When shared risk registers are not established early — or are controlled by a single party — stakeholders may not agree on which risks exist, who owns them or when responsibility transfers. If defects or failures emerge during handover, unclear allocation of responsibility can stall remediation efforts and escalate disputes across contractors, owners and insurers.

  • Vague Testing and Commissioning Timelines

    Commissioning and hot testing are generally covered by an erection all risk policy for a period of time. If definitions and testing windows aren’t explicit, owners risk drifting into gray areas — precisely when defects and performance issues surface.

    Accelerated commissioning can also introduce exposures that were not contemplated in construction plans or underwriting assumptions. In practice, this can include changes in site use. An EV battery manufacturer, for instance, may begin storing batteries during construction, unintentionally altering the risk profile and breaching assumptions underpinning the builders risk placement.

  • Incomplete or Poor-Quality Documentation

    Drawings, operations and maintenance (O&M) manuals, and commissioning data that aren’t up to par can slow or compromise operational readiness and insurance clarity.

    “Inadequate handover documentation can become a big issue,” explains Morgana Multini, Aon's Technology, Media and Communication Lead in Latin America. “Operational teams can spend substantial additional time in year one addressing defects and documentation gaps.”

  • Unclear Maintenance/Monitoring of Operational Equipment

    Without clear ownership, maintenance responsibilities and risk controls fall through the cracks, increasing failure likelihood.

  • Post-Completion Project Upgrades

    Projects like data centers have frequent upgrades that reintroduce construction-like exposures into operational environments — and can trigger disputes between builders risk, property and contractor liability policies.

Eliminate Gray Zones with Contract Aligned Cover

The challenge: Broad insurance structures — like vague contracts — can fail to reflect the realities of phased handovers, leaving revenue generating assets underinsured just when exposure peaks. That’s why handover definitions need to be as clear in insurance policies as they are in contracts.

“In phasing scenarios, handover isn’t a specific date — it’s a risk state,” notes Jason Behrer, Aon’s Managing Director for Builders Risk in the United States. “If you don’t define it in your policies, you’re vulnerable to coverage gaps, disputes and operational interruptions.”

A common point of friction arises around BI. Owners and operators might expect the coverage to apply during phased operations. However, unless it’s explicitly built into the program, it often does not. DSU plays a critical role in the transition, providing first-party protection for revenue delay during commissioning and handover. Without it, recovery may default to liability routes, where compensation depends on proving fault — a lengthy and complex process.

Adjacency is another risk to manage. Construction occurring next to operational components governed by strict SLAs heightens liability, risking equipment damage, operational disruption and costly downtime.

Insurance programs and the underlying contracts must be carefully structured to address the transition period, accounting for potential impacts like equipment damage, business interruption or delays in bringing components online — and clarifying who bears responsibility. To ensure that the construction coverage is maintained where the asset has been put into operation and avoid gaps in the cover, “taken into use” extensions can be included.

Insurance Coverage After Handover

Owners need to anticipate post completion realities, building them into both contracts and insurance architecture that reflect regional nuances:

  • Maintenance Cover: In most regions, CAR policies include maintenance cover to protect the 12- to 24-month defects liability period. This cover does not apply to projects in the United States and Canada, where post-completion defect risk is more commonly addressed through completed operations cover under general liability. Across markets, however, maintenance coverage is highly wording-dependent and the breadth of defect-related protection can vary on a project-by-project basis.
  • Completion Definitions: North American programs more commonly hinge on substantial completion and may allocate post-completion defect risk differently across builders risk/course of construction and completed operations liability cover.
Early Operation Meets Late Stage Construction, Exposing BI Risks

Early Operation Meets Late-Stage Construction, Exposing BI Risks

When a gas turbine unit was brought online during construction, the project unknowingly stepped into a high-stakes gray zone. The asset remained covered under the construction policy with no BI cover, meaning a single failure could have caused major revenue loss. Aon experts flagged the exposure and steered the organization to transition the asset into the operational program ahead of schedule — closing the BI gap and preventing a major financial loss.

3 Practical Solutions for a Safer Transition

Starting early is key to ensuring risk mapping, contract negotiation and underwriter alignment occur well before the construction-to-operation transition.

  1. Integrate risk planning from the outset.

    Create shared, multi-stakeholder risk registers before construction begins to ensure everyone is aligned on risk ownership, timing and mitigation. Build on this foundation with joint risk workshops, consistent documentation and cross-party agreement on how risks are allocated — along with a clear, shared understanding of handover triggers. Effective alignment depends on evidence-based modeling and engineering insight: Tools like virtual commissioning and digital twins can surface issues pre-build.
  2. Define clear, contract-led handover protocols.

    Mitigate ambiguity by defining every milestone (e.g., practical completion, partial acceptance, testing and commissioning periods, and early operation) with precision across contracts, schedules and insurance policies.

    “Embed a detailed, owner-led commissioning plan into contracts from project inception, with O&M participation and digital handover requirements tied to payments and milestones,” says Clemens Freitag, Construction & Infrastructure Industry Lead for Aon in Latin America. “Each period needs to be well-defined.”
  3. Align insurance structures to real-world phasing.

    Ensure that CAR, DSU and operational covers overlap intentionally, and BI risk is captured as soon as an asset begins generating revenue to avoid stranding early operation assets in construction cover. Transition endorsements or lifecycle products (such as Aon's Data Center Lifecycle Program and clean energy solutions) can help.

The right partner can mean the difference between uninsured exposure and seamless delivery during the construction-to-operation transition for your high-value, multi-phased projects.

Aon has the data, industry expertise and integrated insurance solutions needed to address gray zones, strengthen handover clarity and give project owners the confidence to bring projects online without interruption.

Contact us and learn how we can support your next build.

Aon’s Thought Leaders

Vincent Banton
Head of Construction & Infrastructure, Asia

Jason Behrer
Managing Director, Builders Risk, United States

David Carlson
Global Industrials & Manufacturing Leader, United States

Jon Chapman
Head of Construction & Infrastructure, Europe, the Middle East and Africa

Chris Davis
Managing Director, Project Solutions, Construction & Infrastructure, United States

Clemens Freitag
Head of Construction & Infrastructure, Latin America

Morgana Multini
Technology, Media and Communication Lead, Latin America

Milos Obradovic
Placement Director, Construction, Australia

Tariq Taherbhai
Global Chief Commercial Officer, Construction & Infrastructure

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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