Resilience and optimism is what has characterised the renewable energy sector, despite climate issues, supply chain disruption, casualty deterioration, social inflation and geopolitical conflicts, according to a recent report by WTW.
However, overall profitability remains challenging due to variable results within energy classes, analysts warn.
So far, 2024 is proving to be a year of change, with issues like natural catastrophe concerns, supply chain instability, technology maturity, rapidly growing energy storage and globalisation of technologies putting new challenges on the table.
These dynamics are changing at pace, and both clients and insurers need to be prepared to harness this velocity, WTW’s report highlights.
Climate volatility and El Niño & La Niña effect are among the key trends the market is experiencing.
“Unpredictable weather patterns continue to challenge the renewable market, with significant natural catastrophe losses and an unprecedented number of individual weather events exceeding $1 billion,” analysts highlight
Supply chain instability is another key factor, as four years post-COVID-19 pandemic it remains the same globally. This influences lead times for critical items and assessments of asset reinstatement and business interruption risk.
The renewable energy sector is seeing rapid growth in large wind turbines, floating solar installations, green hydrogen, and utility-scale battery energy storage systems.
These technological advancements have prompted markets to innovate and adapt their strategies, the report noted.
The broker has also observed that energy storage innovations is a key trend to consider, as “lithium-ion batteries and green hydrogen are ushering in a new era of energy storage, driving a renaissance in well-known technologies such as hydroelectric pumped storage.”
Finally, the renewable energy insurance market is facing a major challenge in resource skills. To deal with this issue the transfer of skills from traditional energy sectors has been required to support the transition to low-carbon infrastructure.
Steven Munday, natural resources global renewable energy leader at WTW, said: “Recent challenges have tested the insurance markets, but resilience has improved. While surplus capacity exists for proven technologies, caution remains.
“The ongoing competition and potential for an La Niña year keep rates steady, with parametric solutions gaining traction despite integration challenges. To capitalise on emerging opportunities, renewable energy risk and insurance buyers should continue to engage with advisors and markets, employing smarter solutions to navigate the complexities of the evolving landscape.”
WTW believes that the market has increased its general resilience to unknowns, resulting in a more profitable and sustainable relationship with insurance buyers, particularly when worst-case natural catastrophe events do not materialise.
And advises that, in order to take advantage of emerging market opportunities this year, renewable energy risk and insurance buyers need to continue to “engage with advisors and markets and managing risk effectively by considering smarter solutions to existing or amplified problems within well-structured programs.”
