This paper covers the generic procedure for the creation and usage of a complete system simulation for propulsion systems of ships with focus on complex hybrid systems. Due to the large number of available components and challenging operational profiles, there is no longer a single best solution, especially in specialized shipbuilding. On top of that even minor changes in the propulsion system can have a substantial impact on plant performance and vessel behavior. Thus, the early design stage is crucial. The design procedure usually incorporates the selection and dimensioning of available components and concepts. Once this has been done, the dynamic behavior can be analyzed using the developed system simulation environment. With the knowledge gained the needed alterations in the concept can be identified and implemented in the subsequent design iteration circle. Based on the example of an offshore anchor handling vessel, the integration potential of a hybrid propulsion system is examined and evaluated according to the aforementioned procedure. The applied tool is a system simulation environment developed in the Department of Marine Engineering, consisting of a distributed co-simulation of the existing ship design environment E4 and Matlab® Simulink®.