Renewable energy insurers and developers face major losses due to unstable, under-supported supply chain risks, according to the 2022 GCube Insurance market report.
The Covid-19 pandemic and spiralling energy prices are among the factors that contributed to this outcome.
The report findings expose inherent risks of limited supply chain investments, isolated supply sources, and global shortage of skilled labour in complicating claim frequency and severity.
Fraser McLachlan, Chief Executive Officer, GCube, commented: “The market continues to face challenges that are unprecedented in GCube’s 25+ years of experience working with renewable energy insureds. The demand for renewable energy projects and the technology, equipment and skilled labour required to deliver them has never been higher.
“But the roadblocks created by the pandemic on the world’s path towards a cleaner energy future have exposed weaknesses in the global supply chain, which must be urgently addressed.”
According to the report, the Covid 19 pandemic reversed downward trend in average business interruption claims for renewables developers, increasing downtime by 10% against 2019 levels and contributing to 38% BI rise since 2016.
Spiralling energy prices create potential for large-scale revenue losses at underinsured renewable energy projects – review of Total Insured Values (TIV) critical for developers to protect profits.
GCube experts explained the impacts of global supply chain disruption and rising inflation on renewable energy developers, manufacturers, and insurers, amid a climate of unprecedented demand for clean energy.
In a bid to improve resilience for the global renewable sector, cooperation, precise evaluation of insured values, and targeted investment in skills and supply chain diversification, the report recommends.
McLachlan added: “Preparedness will be a make-or-break component of the renewable energy developer’s business plans in today’s market, and part of that is taking reasonable ownership of the level of risk they bring to their projects.
“Ensuring that TIVs are reported as accurately as possible is critical to enabling appropriate cover for components and downtime, and protecting revenue streams – while a realistic approach to competitive contractor rates can offer both security for themselves and flexibility for the contractor in buffering against quality failures.
“In evidencing these challenges within the supply chain, we hope our latest insights report provides a beneficial tool for us, as an industry, to consider how we can work together to better prepare ourselves for what is yet to come. As we expect disruption to become more concentrated, GCube continues to provide the market with unparalleled support and expertise through its commitment to sharing its knowledge to the benefit of its insureds, and the wider renewables industry.”