A German drilling contractor and energy company, Daldrup & Söhne AG, has become the first firm in Germany to use an innovative integrated drilling risk insurance model backed by a reinsurance structure.
The insurance model’s alternative risk transfer (ART) structure is backed by a reinsurance framework and used to hedge the risk of discovery – significantly reducing client’s capital requirements during the early search phases of drilling in geothermal drilling and energy projects, Think Geoenergy reported.
The product was initially successfully tested in the Netherlands and has just expanded to Germany after having been bought to hedge drilling risks for an Enex geothermal project in Southern Germany.
Josef Daldrup, CEO of Daldrup & Söhne AG, explained; “The geothermal energy project in Geretsried is the first integrated project of this kind in Germany, with the successful implementation we have an exemplary reference project in the Netherlands.
“We assume that we will acquire further geothermal energy projects with our ART structure in Germany as well as in our European neighbouring countries. Geothermal drilling – including the first drilling that carries the highest risk – is for our equity capital investors and banks with our ART structure and can be backed up right from the start. ”
This risk model demonstrates the continued disruption of the industry’s value chain, which is expected to break records in coming years with soft market conditions and the technology revolution driving innovation.
Increasingly, reinsurers have been partnering with insurtech firms to move closer to the risk – and this integrated drilling risk model shows reinsurance solutions also being developed without reliance on tech start-ups as reinsurance is now built into the very structure of primary risk transfer products.