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.
Graham Knight, Head of Global Natural Resources, Willis Towers Watson, commented “We are delighted to be launching this report, but we go to press at a time of unprecedented change in both the renewable and insurance/risk transfer industries. As the industry faces up to these new challenges, we are fully committed to supporting it through the coming evolution; all skills at our disposal will help our renewables clients address this less than certain future.”
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