A new report from GCube has underlined how recent extreme weather events that fall outside of traditionally modelled natural catastrophe definitions have exposed the weaknesses of a ‘soft’ insurance market, particularly in the US.
Across both wind and solar, the average nat cat or extreme weather-related loss in the latter half of the decade was over 300% higher than before 2015.
The leading insurer for renewable energy projects says recent entrants to the market offering low deductibles, low premiums and broad terms to gain market share have faced considerable losses, forcing a number of insurers to exit the space over the last decade.
However, GCube says current market conditions are now starting to drive a long overdue ‘reset’ in pricing as insurers seek to ensure ongoing sustainability.
“No market can continually operate at a loss, and renewables insurance is no exception,” said Fraser McLachlan, CEO of GCube.
“As the renewables risk landscape has changed, GCube has been one of the first to alter its terms and conditions to help maintain the sustainability of the sector, and the benchmark needs to be reset across the industry to ensure that projects can continue to be covered.
“As we have just seen in Texas, unmodelled Extreme Weather events can have a significant impact on the grid, and this is only one of many challenges currently threatening the renewables sector.”
McLachlan added that lessons need to be learned from the sector’s management of climate risks to ensure greater resilience to emerging threats like cyber-attacks and the impacts of Covid-19.
“GCube has proved that a sustainable renewable energy insurance market is possible under the right conditions, and we have been able to continue providing A-rated insurance products to ensure that our clients have the cover they need to protect their investments.”
