Renewable insurance plays an important role in Asia’s energy transition:Willis Towers Watson
with the renewable energy industry particularly susceptible to weather volatility, index-based solutions are being increasingly used to address power generation risks, wind and low solar as well as power price volatility and power outages not linked to physical damage.
Willis Towers Watson today launched its inaugural Renewable Energy Market Review for 2020. The Review identifies several new realities that the industry needs to face up to at the beginning of the new decade.
These new realities include:
Geopolitical clouds: Conflicts and other international tensions are seemingly threatening the renewable business landscape – not only stand offs such as the US/Iran situation and the issue of North Korea, but also serious conflicts between Turkey and Syria and between India and Pakistan. The Review identifies new ways in which geopolitical risk can be managed more effectively than by simple insurance purchase.
The new risks emerging from the climate change threat: As the threat of climate change makes itself more apparent with every passing year, it is now generally accepted that renewables are likely to make up the largest share of total global energy supply by 2050. But the Review finds that the accelerated renewable energy industry growth brought on by climate change is bringing with it new risks and issues which need to be faced, particularly within sub-sectors such as Floating Offshore Wind and Hybrid Renewable Energy.
A hardening insurance market: The long period of soft market conditions, characterised by an excess of (re)insurance capital and an emphasis on meeting premium income targets, has finally come to an end. Instead, faced with deteriorating loss ratios and increasing costs, the Renewable Energy insurance market seems to have come to a tipping point as truly hard market conditions have emerged during the course of the last 12 months.
An increasing cyber-security threat: there is considerable concern across the industry as to how to quantify and manage its exposure to cyber risk; at a recent renewables seminar hosted by Willis Towers Watson in Prague, over 84% of delegates expressed concerns that the industry did not know how to manage this risk effectively.
Uninsurable weather risk: with the renewable energy industry particularly susceptible to weather volatility, index-based solutions are being increasingly used to address power generation risks, wind and low solar as well as power price volatility and power outages not linked to physical damage.
George Nassaouati, Head of Natural Resources, Asia, Willis Towers Watson, commented: “Due to the global pressures to reduce emissions and fight climate change, Asian governments and corporations are beginning to embrace the social transition from coal power to renewable energy. While the insurance markets and project financing banks have been promoting this shift, the transition to renewable energy can only be sustainable with a rapid increase in investment into the industry. Not only are insurers leading the movement, they are also developing solutions which are tailor made specifically to tackle issues such as the lack or shortfall of sun or wind energy.”
“By transferring these business risks to the insurance markets, this allows for an improvement of cashflow which would enable business models to succeed and ultimately aid in the shifting of investments from coal to where they are truly needed. Here in Asia, we are focused on continuing to develop and build our resources in this sector to support our clients through the coming evolution,” added George.