Sensor assemblies, electrical penetrator assemblies and associated methods are provided for monitoring operational characteristics of subsea rotating devices such as subsea motors and pumps. Pressure-compensated proximity sensors configured to withstand subsea pressures are disposed adjacent a subsea rotating shaft for directly monitoring a position of the rotating shaft during dynamic operation thereof. A sensor tip assembly includes a sensor cap and a sensing element therein configured to produce a signal indicative of a distance between the sensor cap and the rotating shaft. A substantially incompressible fluid is disposed within a fluid reservoir within a sensor housing, and fluidly communicates with the sensor cap such that at least a portion of an internal pressure within the sensor housing is applied to interior portions of the sensor cap. The sensor housing is configured such that the internal pressure increases in response to an increase in an external pressure of the sensor housing.