Their efforts will clearly involve massive growth in renewable energy, with the International Energy Agency earlier this month predicting renewables will by 2040 account for nearly half of total electricity generation – up from about 25 percent now.
It’s hard to think of a more tangible example of fast-proliferating assets that require insurance than renewable projects.
And given that some of the world’s leading carriers have pledged to curb underwriting for fossil fuel projects, one might assume they would be stampeding towards them.
But several factors have contributed to what this publication noted recently is a hardening market. The Insurance Insider, in partnership with AXIS recently discussed these topics and more, at the symposium titled the Future of Insurance: Climate Risk & the Insurance Implications, hosted by the Gies College of Business at the University of Illinois.
One is an increase in the frequency and severity of losses, ironically in some cases because of weather phenomena possibly linked to climate change.
The second is the untested nature of some of the evolving technology, including mammoth wind turbines and constantly advancing solar panels.
Carriers underwriting at a loss for PR purposes haven’t helped and nor has the time-honoured tradition of governmental flipflopping on the support provided to the renewables sector.
AXIS US head of renewable energy Tom Cain in November bemoaned “stop-start” public policy, which he said led to projects being rushed and made underwriting harder.
Then there this is regulatory pressure. Policymakers may be keen for these products to secure cost-effective cover but regulators overseeing underwriting, including Lloyd’s, are looking at the class closely.
Certain carriers, including CNA Hardy, have decided it’s all too difficult and have beaten a total or partial retreat.
Yet despite all this, renewable underwriting is surely worth carriers pursuing to build specialism in the sector and position themselves for future growth.
The inaugural Munich Re syndicate in a box is one such operation planning to do so, leveraging the expertise of its massive parent.
Even though overall renewable energy investment has wavered in recent months, Paris targets can’t be met without huge capacity growth, and insurers and other investors will make these projects happen, driven in part mounting ESG pressures on their portfolios.
Multinational climate change obligations mean government subsidy regimes will surely have to become more predictable – and the technologies as a whole should become easier get a handle on as the industry matures. Wordings should logically also evolve as risk management know-how increases.
Renewables underwriting – and investment – is of course great PR.
It also addresses a perennial criticism of (re)insurers that their products aren’t keeping pace with modern needs.
But above all providing solutions for new and evolving risk is lifeblood of the industry, and growth would stutter without it.
To view the Climate Change supplement, please click here.