© Lloyd’s 2021
© Lloyd’s 2024

Carbon markets

CCUS

Low carbon
buildings

Batteries and grid

Geothermal

Hard-to-abate sectors

1

Executive summary

2

Nascent technologies and emerging markets

3

Hard-to-abate sectors

Foreword
As extreme weather events are predicted to increase in frequency and severityin the years and decades ahead, there is an undeniable need for accelerated
action across the public and private sectors. This action is crucial to build
resilience, to adapt, and to create solutions that can reduce the impact ofclimate change.
For decades, the global insurance industry has been supporting individuals,
businesses and governments in understanding, mitigating and managing theimpact of increasingly severe climate-exacerbated disasters. Additionally, it has
played an important role in supporting the development of renewable energy
and climate innovation.
With 90% of the global economy committed to decarbonisation towards net
zero, we are witnessing an unprecedented economic and societal
transformation. Insurance continues to play a vital and unique role; enabling,
investing in and protecting the efforts of multiple industries as they takeclimate-positive action to adapt and transition to a sustainable future.
This report, developed by Lloyd’s Futureset and Aon, builds on the findings of
Insuring a Sustainable Future— a report produced by the Sustainable Markets
Initiative's Insurance Task Force, which highlights the opportunities for the
insurance industry to support clients across five green technologies and three
hard to abate sectors. These endeavours will, in turn, help to accelerate thetransition towards a more resilient and sustainable future.

John Neal
CEO of Lloyd’s and Chair of the Insurance Task ForceExecutive summary

The insurance sector has a key role to play in enabling the growth of clean technologies, the scale upof emerging technologies, and the transition of hard to abate sectors
This report explores five emerging green technologies and three hard-to-abate sectors, highlighting the
support that is already available from the insurance industry and how demand is likely to evolve over time

Nascent technologies and emerging
markets

Insurance innovation across these technologies and sectors can
support global progress and the acceleration of industry transitions
towards a more resilient and sustainable future

Summary of key gaps, opportunities and themes

Carbon markets
1. The insurance industry has an opportunity to develop andhighlight a broader range of solutions across underwriting,investments and stewardship to better demonstrate
purpose-led impact (“nature, people and planet”)

CCUS

Low carbon buildings
Batteries and grid
Geothermal

Hard-to-abate sectors
Agribusiness
Shipping
Aviation

2. While proven technologies such as solar and wind are
critical to transition, further support for emerging
technologies will be crucial to facilitate a balanced,
adaptable energy mix
3. There is opportunity for the insurance industry to support
innovation in hard-to-abate sectors of the real
economy, such as marine and aviation. In addition,
insurers could look to form sector-based partnerships
which encourage behavioural change to better support
sustainable goals

4
Classification: Unclassified

Opportunity assessment
MatureThe relative positioning of opportunities forthe insurance industry have been weighted
by:Mature, sizeable existing markets

1. Attractiveness, which considers both
the growth and size of the market,
andCriteria

WeightingGrowth50%

50%

Maturity ofindustry25%

Maturity of tech25%

‒ Number of existing products andcarriers
Geothermal‒ More innovative products required
to meet emerging risks

Low carbon buildings

Grid

Nascent, emerging opportunities

Batteries‒ Risks currently less known‒ Significant opportunity expected tomaterialise in the longer term
‒ Limited insurance capacity
currently

Nature based solutions
and carbon credits

Insurance
capacity25%

Insurance
product
maturity

25%

ImmatureSize‒ Established insurance products inmarketMarket maturity(industry, technology and insurance)

Marketattractiveness

2. Maturity, which takes into accountboth the wider industry and insurance
marketMarket maturity

Executive summary

Building a larger presence in emerging ‘transition’ technologies could help the insurance industry tolead innovation and grow sustainably

CCUS

Nascent, emerging opportunities‒ Early action could support earlymover advantage and capture
significant future growthHigh growth and market size

Market attractiveness(size and growth)

Classification: Unclassified

5

1

Executive summary

2

Nascent technologies and emerging markets

Carbon markets

CCUS
Low carbon buildings
Batteries and grid

Geothermal

3Hard-to-abate sectors

Overview

Carbon offsets are one of the most effective ways to reduce the impact of emissions for hard-toabate sectors while net zero technology pathways continue to develop

Investment

Industry and insurance market dynamics

Carbon offsets are one of the most effective ways to reduce the impact of emissions
for industries that are particularly difficult to de-carbonise – currently natured based
solutions (NBS) projects form the basis of most carbon offsets.

Insurance Offerings

Insurance COB

Value Chain

For many companies that have committed to reaching net-zero emissions targets,carbon offsets will be needed to mitigate emissions they cannot otherwise avoid

Offset providers

Offset buyers

Native Energy

General motors (GM)Sustainable Travel
International

Barclays

Terrapass

Shell

MyClimate

Disney3Dgrees

ToucanIncreasing scrutiny is being
placed on claims made bybuyers of carbon offsets.
Delta Airlines currently faces aclass action lawsuit alleging its
carbon neutral claims, based oncarbon offsets, are “false andmisleading”

Delta

Key Growth Drivers

Headwinds

Net Zero targets

Worsening climate events

Market size andsophistication

Political risks

Growth in tech-based
products

Carbon offset legitimacy

7
Classification: Unclassified

Overview

Regulated entities in the real economy use compliance markets to meet their carbon emissions
caps or baselines, while voluntary markets provide access to offsetting for all

Investment

Carbon markets overview
There are two key markets enabling the trading of carbon-related financial instruments, underpinned by a range of projects focusedon emission avoidance and carbon removal:

Insurance demandCompliance markets (CCMs)

Voluntary markets (VCMs)

Value chain

In a compliance market, regulated entities buy and sell carbon
allowances to remain under pre-determined regulatory carbon
emissions caps or baselines
Compliance markets are created and regulated by mandatory national,
regional, or international carbon reduction schemes

Insurance offerings

Insurance COB

Typical sectors regulated with cap or baselines

In a voluntary market, individuals, companies and governments
trade carbon offsets to reduce their carbon emissions
footprint voluntarily
Participation in the voluntary market is primarily motivated bycorporate social responsibility (CSR) and public relations, but many
participants also treat carbon as any other financial instrument fortrading

Projects issuing carbon offsets, certified and verified
emissions reductions (CERs and VERs)

Electricity andheat generation

Oil, acids andchemicals

Metals, glass,ceramics

Forestry andland Use

RenewableenergyChemical/industrial

Householdandcommunity

Aviation andshipping

Pulp, paper andcardboard

Cement, lime

Waste
disposal

Energyefficiency

Agriculture

Transport

Financial lines products, suchas cap and trade bid guarantee
bonds1 and carbon offset credit
invalidation insurance

Insurance demand

Products across the project
lifecycle, including property andcasualty, as well as more
specialised coverage dependingon the technology involved

8
Classification: Unclassified

Overview

The term “carbon credits” is regularly used to describe “carbon allowances” and “carbon offsets”

Definition
AssociatedmarketRegulation
Description

Insurance offerings

Insurance COB

Value chain

Investment

Carbon markets overview
Carbon allowance

Carbon offset

A carbon allowance is a tradable permit or certificate to emit one metric tonne of CO2 orequivalent greenhouse gas (GHG)

A carbon offset is a certificate awarded for a proactive initiative that reduces or removes
emissions

Compliance markets (“cap-and-trade” and “baseline-and-credit” systems)

Voluntary markets (VCMs) and compliance markets (CCMs)

1. Primary markets – Issuer is typically the state/a relevant authority of the state

1. Primary markets – CCM issuer typically the state/a relevant authority of the state

2. Secondary markets – CCM scheme participants trade allowances directly but also
use secondary markets to trade allowances as spot trades, forwards, or derivatives(futures and options)

2. Secondary markets – CCM scheme participants buy offsets directly, but also use
secondary markets, trading allowances as spot trades, forwards, or derivatives (futuresand options)
Voluntary market – The standard issuer or registry generally sets methodology andcriteria for project certification and generation of carbon offsets, but project developers
may also propose new methodologies for programme approval and adoption

Compliance market – Government or state-led schemes for carbon allowances‒ In a cap-and-trade scheme (e.g. California cap-and-trade scheme, EU ETS2 and the
RGGI3), an upper limit (cap) on emissions is fixed, and carbon allowances are either
issued for free based on specific criteria or auctioned‒ Under a baseline-and-credit scheme (e.g. the Technology Innovation and Emissions
Reduction Regulation in Alberta, Canada), baseline emissions levels are defined forindividual regulated entities, and credits are issued to entities that have reduced theiremissions below this level, which they can sell to others looking to stay below theirbaselines

Compliance market – Individual regulators set their own rules defining which offset
projects are eligible to count towards meeting compliance requirements. Voluntaryoffsets, unless explicitly accepted into the compliance regime, are not allowed to fulfil
compliance market demand‒ In the voluntary carbon market, entities that are not regulated as part of an existing
government scheme and even individuals, can purchase carbon offsets in order toreduce their carbon footprint‒ Some regulated entities may buy or trade carbon offsets to make up a small
proportion of their emissions reductions (where permitted4), or to voluntarily exceed
their required baseline, or reduce below their cap

9Classification: Unclassified

Overview

There will be an increasing demand for insurance products to support organisations, as more start to leveragecarbon offsetting to meet their emissions targets
Global investment breakdown

Investment$2.0bnNet zero targets – Already over 20% of the world’s largest 2,000 companies have committed toreaching net zero emissions, and more are continuing to do so. Carbon offsets play a key role
for many of those companies

Voluntary carbon market
size, 2018-2021 ($bn)1

Market size and sophistication – Voluntary carbon markets are becoming larger and moresophisticated, providing more options for companies to purchase offsets$0.5bnValue chain

Growth drivers$0.3bn$0.3bn

2018

2019

2020

Growth in tech-based projects – NBS carbon offsets are currently the focus of carbon offset
projects, however post 2030 it is expected that tech-based offset projects will likely outpace
nature-based solutions

2021
Headwinds

Insurance offerings

Insurance COB

Current market trends‒ The voluntary carbon market declined at a -21% CAGR from 2011 - 2017,
before growing significantly at an 89% CAGR between 2018 and 2021

Worsening climate events – Many naturally-based carbon offset projects are particularly
exposed to natural catastrophe events such as forest fires and hurricanes. Worsening climate
conditions could pose a significant threat to the industry‒ The 281% increase in market size from 2020 to 2021 was driven by rising
prices for traded carbon offset credits for projects such as reforestation, “blue”
carbon from initiatives involving coastal and marine ecosystems, and avoided
forest conversion

Political risk – The Zimbabwean Government recently announced all existing carbon contracts
will be voided to introduce a new revenue split arrangement for emission reducing projects. This
could occur in other nations, opening up further political risks‒ Global climate and sustainability goals, such as net zero pledges, are driving
growing demand in the voluntary carbon market

Carbon offset legitimacy – Some NBS schemes have come under investigation over their
credibility. A study on schemes in the Brazilian Amazon found they had overstated theiremission reductions. Additionally, new EU proposals aim to ban environmental claims based
solely on carbon offsetting

10
Classification: Unclassified

Overview

Carbon offset projects require both standard and specialist products. Insurers are well placed to work with
developers to tailor their offerings whilst facilitating positive solutions

Investment(Re)insurance class ofbusiness impact
Accident andhealthKey coverage sought for NBS projects

Gaps in coverage currently offered

Property: Protection against physical losses to assets that generate carbon offsets.
For example, natural disasters and pest infestations can damage or destroy forests,
wetlands and mangroves. Coverage for project developers can include ecosystem
restoration costs and carbon revenue loss protection for specified events

Casualty

chain
Value Chain
Value

Cyber
Casualty (environmental liability): Protection against the risk of carbon offset
projects resulting in negative environmental impacts. This may include compensation
to 3rd parties for property damage, clean-up costs, statutory clean-up notices andnatural resource damages

Financial lines

Insurance COB

Marine, aviation,transport (MAT)

Motor

Property

Other – financial lines1: Protection against losses arising from commercialisation of
the Carbon Credit such as crime coverage to help protect against illegal logging andfraud, credit insurance, surety bonds and carbon credit invalidation insurance as well
as negligent or deliberate misrepresentation

Other

offerings
Insurance Offerings
Insurance

Other – political risk: Protection against the changing political landscape andinstability in some of the project host countries. Specifically, policies can protect
against invalidation, seizure, and other political and regulatory risks arising fromgovernment actors

Impact
High

Med

Low

-

‒

Risk of property damage from natural catastrophes are well covered in the existing
insurance market but increased frequency and severity means capacity is
reducing at a time when demand is increasing‒

There is an increasing demand for parametric solutions to provide indemnity incase of severe weather-related risks, due to quick deployment of a pre-determinedpayment. However, lack of understanding in the market, difficulty in assessing thedata in a changing landscape, and lack of reinsurance capacity means there are
few offerings currently in the market‒

Environmental liability products on offer for NBS generally are limited to highvalue projects with only the large global carriers having appetite due to the complex
and rapidly changing regulatory environment‒

Some carriers have started to offer protection in the event of carbon storage siteleaks via Environmental Liability insurance but products in this area are currently
very limited‒

Regulatory risks are not covered in the market and regulatory bodies have
stepped in to offer political risk cover in the absence of offering from the private
market. E.g. The World Bank’s insurance arm, the Multilateral Investment
Guarantee Agency (MIGA) announced in June 2023 that it intends to step in to offer
political risk insurance and facilitate investment in NBS‒

Cap and trade bid guarantee bond products have been developed for thecompliance market to guarantee pay out if an auction participant is awarded carbon
credits. However, these are in their infancy with only one product currently on themarket and product design considerations will be key to conform with regulatory
guidance and requirements‒

Also available in the market is underperformance, reversal and fraud coverwhich includes risks such as same credits being sold to multiple owners as well asother cover such as third-party negligence‒

There is currently no coverage for products that specialise in carbon offset
verification for example, errors and omissions cover

11
Classification: Unclassified

Overview

New insurance solutions are being developed to protect both compliance and voluntary carbon markets
Example market offerings

Insurance offerings

Insurance COB

Value chain

Investment

ProviderAon proprietary data
removedProduct

MarketProduct description

Carbon offset
credit underperformance,
reversal &fraud

Voluntary‒ Marsh’s insurance addresses key risks associated with buying carbon offset credits in theunregulated VCM‒ Risks include schemes not delivering anticipated amount of sequestered carbon, captured carbon
being lost, or purchaser being a victim of fraud

Cap and trade
bid guarantee
bondsCompliance‒ The bonds serve as a financial guarantee to the auction administrator that the qualified bidder will
remit payment for any allowances the bidder wins at auction‒ These bonds are used in California to meet its goal of reducing GHG emissions

Carbon offset
credit fraud
and negligencecover

Voluntary‒ Protects purchasers of carbon offset credits in the voluntary market in partnership with RespiraInternational and Nephila Capital, launched in 2022
‒ Provides cover for third-party negligence and fraud, backed by lead capacity from Nephila and other
Lloyd’s syndicates

Carbon offset
creditinvalidation
insurance

Both‒ Protects carbon offset credit purchasers against loss due to the invalidation of credits held on theirbalance sheet‒ In the event of invalidation, the product provides funds to purchase replacement credits

Voluntary‒ Kita was part of the Lloyd’s Lab eighth cohort and was approved as a Lloyd’s coverholder in
December 2022
‒ Kita launched its product in early 2023, which protects the purchaser of carbon offset credits against
under-delivery where seller fails to deliver credits on the terms specified in purchase agreement

Both‒ Oka is seeking to offer comprehensive insurance policies to replace carbon offset credits that havebeen reversed, invalidated, double-counted, or stolen‒ Oka launched in early 2023, raising over $7m in a seed funding round led by Aquiline Technology
growthCompliance‒ Provides protection to the project developer in the case of carbon offset credit invalidation per the
California Cap & Trade Programme Regulations, with the owner of the underlying credits receiving
the relevant compensation‒ This is the oldest product in the carbon credit market, launched in 2011

Carbon Credit
Purchase
Protection
coverComprehensive
carbon offset
creditprotection1
California Air
Resources
Board carbon
offset credit
invalidation
insurance

12
Classification: Unclassified

1

Executive summary

2

Nascent technologies and emerging markets

Carbon markets

CCUS
Low carbon buildings
Batteries and grid

Geothermal

3Hard-to-abate sectors

Overview

Carbon capture technology development is gaining momentum, with up to 200 projects planned by 2030, manyof which require both standard and specialist insurance products

Investment

Industry and insurance market dynamics‒ CCUS refers to a suite of technologies that enable mitigation of CO2 emissions from large
point sources such as power plants, refineries, and other industrial facilities‒ In the IEA Clean Technology Scenario, which sets out a pathway consistent with theParis Agreement, CCUS contributes almost one-fifth of the emissions reductions needed
across the industry sectors, particularly in hard-to-abate areas

The CCUS process involves CO2 capture, transportation and storage in geological formations or
use in certain industries (e.g. food). There are several key stakeholder types throughout the
CCUS process which will may have differing insurance requirements
1) Capture

Value chain‒ The development of the CCUS market varies greatly across regions where North
America sees a proliferation of smaller projects, whilst Europe and Asia see fewer,
larger projects

200+

The IEA project pipeline includes announced ambitions for 200 new
carbon capture facilities to be operating by 2030 capturing over 220MT
CO2 per year

Capture by
combustion or
direct air capture

Insurance offerings

Insurance COB

Key growth drivers

2) Transportation

3) Storage and uses

Through pipelines,
by water or rail androad tankers

Deep geologicalstorage, mineral
storage or direct
usage

Headwinds

Government regulation

High cost of production

Provides an emissions
stopgap

Technological maturity

Public perception

14
Classification: Unclassified

Overview

Investment in CCUS is expected to grow significantly towards 2030 as it becomes more commercially viablethrough policy change, incentives and technology maturity
Global investment breakdown

Investment

Growth drivers

Government regulation - Stronger climate targets and investment incentives throughgovernment regulation have injected new momentum into the market e.g. UK CCF
Infrastructure Fund, $3.7bn Biden administration investment

CCUS investment,
2025-20301 ($bn)

Value chain$178bnProvides an emissions stopgap - CCUS provides fast temporary solutions to allow nations tocontinue to use high emitting industries whilst still limiting their emission$40bn

Headwinds

Insurance COB

Current market trends‒ CCUS project performance remains uncertain – as of 2022, research globally
notes that 80% of projects have either failed to launch, or failed after launch​‒ Global policy changes are garnering increasing interest in CCUS​:‒ US – $3.7bn investment in CO2 removal projects under the Biden
administration‒ UK – £1bn CCS Infrastructure Fund formed (CIF)​

Insurance offerings‒ APAC – $1.2bn investment, largely from projects in Australia andMalaysia

High cost of production - CCS technologies remain costly to implement, construct andoperate. Additionally, the cost of infrastructure to support CCUS including pipelines and storagesits remains expensive, especially in regions where alternative lower-cost technologies areavailable
Technological maturity - Next-generation carbon capture technologies are seeking to use
less energy, be lower cost and enable the large-scale capture of CO2
Public perception - The public remain concerned around the capture and storage of CO2 andthe potential for leakage risks and environmental impacts. Governments and other actors areseeking to address these concerns through education and engagement

15
Classification: Unclassified

Overview

The US is the global CCUS leader, with regulated industries driving investment in CCUS to limit overall carbon
emissionsRegional region regulatory outlook

Global carbon capture investment

North America

Investment

Overall global CCUS investment, $bn 2021-2030
North America

LATAM and
Caribbean

4%

3%

8%
8%

14%
2026-2030

$46bn

20%

62%

Africa andMiddle East

Europe

16%

6%

21%

21% $48bn
81%

Value chain

9%

20%

$20bn

APAC (exc.
China)

32%

24%

$31bn

42%

24%

1%
8%

7%
6%

14%
16% $29bn

$13bn

22%

26%

5%

20%
39%

$9bn

25%

$19bn

$24bn

68%

Insurance COB

Trinidad and Tobago are looking to replicate the same model as the
UK and become a carbon hub for the regionEU2%2021-2025

26%

Most of Europe's offshore CO2 storage capacity is in the North Sea,
where there are numerous oil and gas fields and saline aquifers
In the EU, the CCS directive provides a comprehensive legal
framework ensuring fair and open access to CO2 storage sites
APAC ex. China

41%

44%

86%

44%

Indonesia is a front-runner in Asia with regards to creating regulatory
frameworks for CCUS activities
Australia is planning to scale up its CCUS capabilities to meetdemand form top buyers such as Japan and Korea$119bnInsurance offerings

Mexico developed a legal framework through a study supported byWorld Bank to test and identify adjustments for their current legal
process
LATAM and Caribbean

$43bn

43%

42%

The US is the global CCUS leader, accounting for 60% of current and
50% of planned future capacity, with 85% of emissions coming fromplants located within 100km of a planned CCUS site

$86bn

$47bn

$13bn

Middle East & Africa
C. 90% of power in South Africa is generated through fossil fuels, ofwhich 72% is coal. Two power stations are now equipped with CCUS

49%
Low emission
fuels

31%

18%

3%

Power

Industry

Direct air capture

Middle East currently has 3 operational CCUS facilities, 2 CO2-EOR
projects in Saudi Arabia and Abu Dhabi and a CCS project in Qatar

16
Classification: Unclassified

Overview

The US’s mature fossil fuel industry combined with investment from the DOE's Office of Fossil Energy has
resulted in a strong pipeline of lower cost CC projects
Regional considerations

Regional plant size and status

Insurance offerings

Insurance COB

Value chain

Investment

Europe‒ United States: leaders in CCUS due to an abundance ofoil and gas reserves, 45Q tax credit incentives for CCUS
projects and public partnerships driving technology
development‒ Australia: gas companies need to quickly adopt to CCUS
to continue operating under Australia’s ambitious 2030
GHG reduction target (26-28%)‒ Canada: hopes to capture and store 15 million tons of
CO2 per year by 2030. This is expected to contribute to
the country’s goal of reducing GHG emissions by 40–45%
from 2005 levels‒ Norway: initiative “Longship” is solely committed tofacilitating a cost-effective solution to CCUS, with up to
2/3rds of funding for CCUS projects being provided by thegovernment‒ United Kingdom: government approach sets out the plan
to deliver 4 CCUS low carbon industrial clusters. The
North Sea offers high potential for storage due toextensive reservoirs, good geology, existing infrastructurewith appropriate regulations and low Nat Cat exposure‒ Japan: is a global leader in the manufacturing industry,
and CCUS could help keep many of its thermal power
generation assets online while achieving their ambitious
2030 GHG targets (31% to 37% below 2013)

North America# active projects:
Avg. cost ($):

69
$339m

# planned projects:
Avg. cost ($):

83
$96m

# active projects:
Avg. cost ($):

50
$932m

# planned projects:
Avg. cost ($):

27
$451m

CCS
53%

Capture31%

APAC (exc. China)

Capture
28%

CCS
36%

Storage16%# active projects:
Avg. cost ($):

27
$2.0bn# planned projects:
Avg. cost ($):

16
$533m

Storage
36%
CCS
48%

LATAM and Caribbean

Africa and Middle East

# active projects:
Avg. cost ($):

4$63m

# active projects:
Avg. cost ($):

5$58m

# planned projects:
Avg. cost ($):

1
unknown# planned projects:
Avg. cost ($):

3
$15bn

CCS
80%

Capture20%

Storage
0%

CCS
40%

Capture37%

Storage
15%

Capture30%

Storage30%

17Classification: Unclassified

Overview

CCUS provides a near-term solution for carbon emissions control in hard-to-abate sectors, insurance needs
for stakeholders across the value chain are expected growFiltration

Transportation

Post-combustion‒ CO2 is captured from the exhaust gases and most used bypower plants
Combustion

Value chain

Investment

Carbon Capture

Industrial
wastePower plants

Pre-combustion‒ Traps the CO2 before burning the fossil fuel by using agasifier to form synthetic gas. The hydrogen produced fromthis can be used as fuel, the production of fertiliser, chemicalgas fuel, and power production

Deep geological storage‒ Also known as ‘geo-sequestration’, storage
in deep geological formations such as:
Sedimentary rocks, ‘Un-mineable’ coal andSaline aquifers
Pipelines
Pumping though pipelines isthe cheapest and mostreliable technology

Oxyfuel combustion‒ Burning the fuel in pure oxygen instead of air, produces only
water and CO2 allowing easy filtration. Used by modern
power stations

Natural gas
processing

Insurance COB

Atmosphere

Mineral storage‒ Captured CO2 is reacted with naturally
occurring iron (Fe), magnesium (Mg) andcalcium (Ca) minerals.
Uses‒ Power Stations: Enhanced oil recovery

Water‒ Food Industry: using CO2 in soft drinks, dry
ice for transportation‒ Feedstock: convert to polymers, building
materials, chemicals, and synthetic fuels

Direct air capture‒ It is possible to scrub CO2 from the open atmosphere, but
efficient processes are still being researched. The estimatedenergy needed is only slightly more than for capture fromlarge emission sources

Storage and uses

Rail and roadtankers‒ Combine with hydrogen to produce fuel by
combining it with hydrogen “Power-to-X”
solution

Insurance offerings

Key stakeholders‒ Power plants‒ Steel, concrete manufacturers‒ Refineries‒ Oil production companies
Sourcing, processing/preparation, and storage are largely handled
by the same stakeholders, with occasional specialist support‒ Food industries‒ Chemical plants‒ Private fuel companies‒ Food industries

18
Classification: Unclassified

Overview

Whist the CCUS market is still developing​, there is a clear opportunity for insurers to use their experience intailoring standard products to transition innovation

Investment(Re)insurance class ofbusiness impact

Gaps in coverage currently offered‒

Construction covers such as CAR/EAR, decennial, DSU and loss of well control
are risks considered standard in the market and well covered by the construction
market. However, as investment increases and the technology becomes more
prolific there is like to be an increased need for specialist standalone insurance
which is currently limited in the market

Casualty‒

Clusters, such as the East Coast Cluster in the UK, offer significant opportunity, as
does the retrofitting of current processes for CCUS

Cyber

‒

Few projects are expected to be operational in the short term, thus currently low
demand exists for operational programmes‒

The operational stage poses additional complexity due to variance in the businessmodels of CCUS clients compared to traditional energy clients e.g. Exploration &Production (E&P) clients‒

Liabilities related to CO2 storage and “cavern integrity” have generally been
considered “uninsurable” by the market with no insurance coverage available‒

Additionally, there is limited cover for CO2 leakage indemnity due to a lack ofdetailed understanding in the market of the geology‒

Few carriers are offering third party liability, pollution clean-up under construction,
operational, decommissioning and post-close phases‒

Limited cover available in the market to cover leakage risk and associated loss ofcarbon tax breaks or tax credits‒

Cover not generally available for revenue guarantee or technology performanceissues‒

Pipelines cover is available via natural resources teams and marine transport via
marine teams

Accident andhealthValue chain

Key coverage sought for CCUS projects

Other (construction): Construction/erection all risks (CAR/EAR), decennial liability
and delay in start-up (DSU) coverage will become increasingly popular, as new
projects exit design phases and begin construction in the coming years

Property: Operations cover related to business interruption and property damage
Financial lines

Insurance COB

Marine, aviation,transport (MAT)
Environmental liability (casualty): Storage site leaks both onshore and offshore
could impact the underlying ecosystem and cause environmental damage

Motor

Property
Financial lines1: Surety and trade credit coverages, e.g. for raw materials traded
across international markets

Insurance offerings

Other

Impact
High

Med

Low

-

MAT: Pumping CO2 through pipelines is the cheapest and most reliable technology,
but there will also be instances of transportation on water or using rail or road tankers

19Classification: Unclassified

Overview

CCUS construction risks are typically well supported by the insurance industry, with new solutions emerging tocover more specific risks related to carbon capture
Example market offerings

Investment

ProviderProduct description‒ Long-term insurance structures for the operation and maintenance of carbon capture, utilisation and storage
infrastructure‒ Also provides insurance to cover the loss of value of the carbon captured if there is a failure of containment‒ Through its wholesale business arm, Ironshore, Liberty Mutual has expressed ambitions to broaden its environmental
liability coverage to protect against CCS risks (through SPILLS1 and CELL2 product lines), which could include pollution
cover, financial insurance, and tax credit cover

Value chain‒ Liberty would evaluate coverage options on a risk-by-risk basis‒ Zurich offers Carbon Capture and Sequestration (CCS) liability insurance, which covers losses associated with these
operations‒ It also offers ‘Geological Sequestration Financial Assurance’ which ensures a steady source of finance after a plantcloses to “cap” the well and monitor the carbon stored

Insurance COB‒ Aon is in the process of developing a variety of products to support the Construction and Operations lifecycle of CCS
projects, with pre-and post-combustion capture technologies, Direct Air Capture and CO2 Enriched Concrete, as well asother technologies in scope‒ Howden has launched a first-of-its-kind insurance facility covering the leakage of carbon dioxide (CO2) from commercialscale carbon capture and storage facilities

Example industry partnerships

Insurance offerings

Climeworks and Swiss Re strategic partnership‒ Orca was the first Direct Air Capture (DAC) facility of scale in the world and is an initiative by Climeworks‒ Swiss Re committed to its own net zero operational emissions by 2030 through a 10-year DAC andstorage purchase agreement with Climeworks, along with agreement to collaborate on developing risk
management knowledge and risk transfer solutions

20
Classification: Unclassified

1

Executive summary

2

Nascent technologies and emerging markets

Carbon markets

CCUS
Low carbon buildings
Batteries and grid

Geothermal

3Hard-to-abate sectors

Overview

Buildings account for a large proportion of global energy consumption and GHG emissions, making retrofits
and green property coverage critical components of the net zero transition
Industry and insurance market dynamics

Investment••

Retrofitting aims to reduce the associated environmental impacts throughupgrading the building using modern technologies to retrofit better energy
management and efficiency, improving ventilation, and reducing heat loss
Green property is any plan, project or technique that might lessen or eliminate
negative environmental impacts whilst minimising future impacts e.g. by installing
new heating tech such as Heat pumps and Hydrogen boilers

Key growth drivers

Headwinds

Insurance COBof global energy consumption is through buildings, along with
25% water usage, and 33% greenhouse gas emissions

Legislation

Greenwashing

Futureproofing

Supply chain issues

Insurance offerings

Value chainc.40%

Net zero targets

The role of technology

Developers/investors/
manufacturers
In most markets developers/
investors will be responsible for
insurance

Government organisations

Financial institutions

In certain jurisdictions thegovernment is responsible for
insurance and are key owners of
low efficiency buildings

Owners of large real estate
portfolios will be likely key clients

HoneywellWorcester
Bosch Group

EuropeanInvestment
Bank

Infrastructure
Ontario

J.P.
MorganBlackstone

JohnsonControls

Viessmann

New York
Sate ofOpportunity

CanadaInfrastructure
Bank

Schroders

Brookfield
Asset
Management

22
Classification: Unclassified

Overview

While investment is expected to grow, a lack of consistency in policy is likely to hamper acceleration of retrofits
for commercial properties

Investment

Global investment breakdown
Growth drivers

Retrofits and green buildings (heating1)
investment, 2025 – 2030 ($bn)2

Legislation and incentives – The UK government now requires all >£5m a year government
contracts to commit to net-zero by 2050, whilst from 2027-30, in the EU, it will be mandatory todisclose all potential emissions over the building’s lifecycle. In the US, the Inflation Reduction Act
of 2022 included >$5 Billion incentives to drive low carbon procurement in buildings andconstruction+41%

Value chain$322bn$228bnFutureproofing – In a post-pandemic world, there is a renewed drive to shift towards
sustainable practices, whilst minimising shocks to livelihoods and ensuring societal changes areresilient to any future, unexpected economic shocks
Net zero targets – It is estimated that the global construction sector must decarbonise by almost
100% by 2050 to ensure Paris Climate agreements are achieved
Headwinds

Insurance offerings

Insurance COB

Current market trends‒ The Renovation Wave in the European Green Deal aims to renovate 35
million inefficient buildings by 2030, funded by NextGenerationEU andprivate institutions‒ However, it is estimated that €200bn p/a would be needed to meet thecurrent net zero targets, and the current rate of retro-fitting would need to
be tripled‒ Lack of long-term clarity and certainty about the policy and regulatory
strategy for decarbonising buildings and lack of trust due to previous
policy failures is likely to hamper acceleration of retrofits for commercial
properties

Greenwashing – ‘greenwashing’ claims may arise against construction professionals as
developers focus on sustainability and energy performance. Developers may make bold ‘net
zero’ claims, with a resultant risk of litigation if those claims aren’t met
Supply chain issues – Post pandemic there have been supply issues with building materials.
The drive to build green may exacerbate these issues with the requirement to only use green
materials, therefore leading to delays on completion dates or the installation of non-green
products
The role of technology – From June 2022, all new residential buildings in England and Wales
required to have electronic vehicle charging points. As buildings become smarter and moreconnected with technology this increases the potential for technology failure and cyber risks

23Classification: Unclassified

Overview

The buildings and construction value chain is complex, with low-carbon solutions adding further demand for
tailored insurance solutions

Insurance offerings

Building value chain

Stakeholder‒ Manufacturers of building
materials
Technology applications‒ Low carbon materials used
to reduce embodied carbon
in manufacturing ofmaterials e.g. mass timber

Real Estate

Construction

Uses

Stakeholder‒ Contractors carrying out theconstruction ofbuildings/infrastructure

Stakeholder‒ Real estate owners andinvestors
Technology applications

Stakeholder‒ Occupants of buildings
including residential andcommercial

Technology applications‒ Carbon credits

Technology applications‒ Electrification of equipment
including site vehicles‒ Decarbonisation of assets
and portfolios‒ Smart devices‒ Use of heat pumps‒ Design and processoptimisation for demand
reduction‒ Renovation of buildings:
use, maintenance, repair,
replacement, refurbishment‒ Energy and water operation

Stakeholders

Influencer value chain

Insurance COB

Value chain

Investment

Manufacturing

influence

influence

All parties play a major role invery early phases of buildings,
and decisions have a big
influence on how much carbon
the buildings will emit in the
futureResponsible for determining if and how constructedCompanies in the value chain must cooperate and engage to collectively reduce indirect emissions of the building system while meeting their respective reduction goals

24
Classification: Unclassified

OverviewAs global policies mature in line with transition pathways, investment in retrofits will follow, presenting a material
opportunity for the insurance industry to support clients

Investment(Re)insurance class ofbusiness impact
Accident andhealthCasualty

Gaps in coverage currently offeredFinancial lines: Professional indemnity to cover against breach of contractual
obligation to exercise reasonable care and skill from contractors, engineers andarchitects involved in design and construction works. Warranties or energy
performance guarantees related to efficiencies gained by the technology could be
increasingly important as regulations tighten. These would typically sit outside
existing policy provisions and would likely need to be covered through an add-on.

‒

There is limited capacity currently available for energy performance guarantee –this is a crucial element to provide investors with cover should the investment inretrofits and energy efficient technology not be covered by the actual energy
savings‒

Warranties and performance guarantees require careful consideration to ensure thecover is insurable‒

There is a potential for developers to make bold net-zero claims, with a resultant
risks of litigation if not substantiated. BNY Mellon were charged in 2022 of
misstatements and omissions about ESG considerations in making investment
decisions. Given this is an emerging risk, there are no specific products but could
be included under errors & omissions (E&O) policies in future‒

Constructing and improving buildings to be more sustainable does not creatematerially different risks to existing property and liability construction exposures
and would generally fall within markets appetites. However, carriers will need toconsider the impacts of new technologies and/or materials to the exposure. For
example, increasing the likelihood and severity of fire losses through the greateruse of timber and structural insulation panels in new construction projects‒

Prototypical methods of construction and materials being used can materiallyalter the exposure profile, particularly for latent defects (which can take a number ofyears to emerge), and result in unexpected losses which could also be complex and
expensive to settle. These challenges will need to be addressed by insurance
markets to ensure a sustainable insurance offering for low carbon buildings‒

Cyber risk from smart technology in homes generally can be covered under
traditional Home Insurance currently however for businesses as this technology
becomes more prolific there may be a need for separate cover. As the market
matures, the growth in connected devices and distributed energy resources is
expanding the potential cyberattack surface of electricity systems, raising cyberrisks with wide reaching consequences

Value chain

Cyber

Financial lines

Insurance COB

Marine, aviation,transport (MAT)

Casualty: Public and employers’ liability to provide cover against the associatedrisks within buildings projects including personal injury or death

Other (Construction): Anticipated growth in construction/erection all risks(CAR/EAR), decennial liability and delay in start-up (DSU) coverage, as new projects
exit design phases and begin construction in the coming years

Motor

Property

Other

Insurance offerings

Key coverage sought for projects

Other (Cyber): Connected devices and smart technology is likely to be increasingly
utilised in combination with energy efficiency, creating additional cyber risks

Impact
High

Med

Low

-

25
Classification: Unclassified

Overview

Change is being driven from both ends of the insurance lifecycle, with a growing number of innovative products
available and commitments to ‘Build Back Better’ through the claims process
Example market offerings

Insurance offerings

Insurance COB

Value chain

Investment

ProviderHalifax

Product description‒

Builders risk insurance programmes provide risk-specific coverage for mass timber project risks‒

Accelerates use of cross-laminated timber across construction projects‒

Energy efficiency insurance designed for those investing in energy-saving measures‒

Covers cost of installed assets, project revenue, and annual gaps in energy savings‒

Resilient Repairs clause encourages the replacement and repair of assets in environmentally friendly way, with additional
cost covered by insurers‒

Property coverages evaluate environmental variables like flood and fire to offer insurance against a specific risk profile of
new sustainable construction supplies & methods‒

LSM provide eco-friendly upgrades that allow customers to replace damaged property with products of equal value, while
covering additional costs associated with upgrades of a higher green standard.

‒This could include replacing a damaged roof and covering the cost of adding solar panels‒

Halifax Home Insurance have partnered with Ideavate Limited to make homes greener‒

During the claims process Halifax will then provide options for how they can structure the repair to include options such as
wall insulation and solar panels‒

The Build Back Better scheme enables homeowners to install property flood resilience measures, up to £10k, when
repairing their properties after a flood‒

There are 10 participating insurers signed up to the programme including Hiscox, LV NFU Mutual, Aviva etc

Example industry partnerships
SMI Sustainable Buildings Taskforce‒

Made up of global CEOs from throughout the building industry‒

Collaborating to accelerate delivery of net zero buildings to reduce carbon emissions

26
Classification: Unclassified

1

Executive summary

2

Nascent technologies and emerging markets

Carbon markets

CCUS
Low carbon buildings
Batteries and grid

Geothermal

3Hard-to-abate sectors

Overview

Battery energy storage systems (BESS) are expected to play a pivotal role in reducing dependency on highcarbon energy generation, accelerating the growth of renewables
Industry and insurance market dynamics

Insurance COB

Value chain

Investment‒ Battery pack prices have declined by 89% since 2010, driving growth in the sector which
will play a crucial role in the energy transition
Grid efficiency‒ Demand for batteries is expected to grow more than 8x by 2030 and insurers will playa key role in helping clients manage the associated risks‒ Energy storage is one of the emerging techs in which both insurers and distribution
partners have developed the most dedicated capabilities

60%

Increase in installed capacity of grid-scale batteries in
2021 vs 2020

Key growth drivers

Government regulation

Stationary
energy storage

Industrial
uses

Commercial andresidential

Different applications of BESS require different characteristics, broadly summarised ashigh power (ancillary) or high energy (bulk energy). This is due to variables indesign such as:‒ Power rating (MW); storage duration (h); cycling or lifetime; self-discharge (%);
energy density; efficiency (%); response time

Headwinds

High cost of production

Geopolitical uncertainty
National renewable energy
policyInsurance offerings

Infrastructure costs

Technology advances

Supply chain dependencies

28
Classification: Unclassified

OverviewTo achieve net zero ambitions, global electricity grids require a significant upgrade to shift to flexible ‘distributed’generation models
Example electricity grid evolution

Insurance COB

Value chain

Investment

Historical

As-is

Local generation

Large-scale transmission and distribution‒ In developing economies such as the‒ Today, power generators are connected toDistributed generation‒ Large investments and significant re-engineering is

UK, Europe and the US, local power“synchronous grids” with centralised control of

required to counteract regional bottlenecks andfacilities initially generated electricity fortransmission and distribution

develop “distributed” generation on an interconnectedindustry, gradually broadening their‒ Renewable generators range from “large-scale”

reach to supply to local communities

generation such as offshore wind, to small,‒ Historically, coal was the main source ofenergyand flexible grid
‒ Excess supply of renewable electricity is either stored“distributed” schemes such as household or small-

locally or transmitted towards high-demand centersscale solar with volatile outputs at varying voltage

through distribution system operators, allowing for‒ Designed specifically for large-scale energy
generation, with unidirectional flow, global power grids

Insurance offerings

To-be

are not suited to the volatile and often “embedded”
nature of expanding renewables

almost unlimited addition of renewable electricity
generation to the grid

‒ Expected decrease in future generation costs are
expected to outweigh construction costs

29
Classification: Unclassified

Overview

Moving to a ‘distributed’ electricity transmission model will enable the grid to support all renewables solutions,but solutions such as BESS are needed for surety of supply

Investment

Transformation to distributed generation ​Wide-scale transformation of electricity systems to a distributed generation
model, has several advantages:‒ Enables climate adapted technology to remain effective under the fluctuating
weather circumstances, facilitating evolution away from fossil fuels in thetransportation, industry and building sectors‒ Improves resilience and efficiency of the electricity grid

Value chain‒ Facilitates connection of low-carbon industrial buildings providing embedded,
local, renewable generation‒ Supports transition towards electrified alternatives in transport and heating,empowering end-customers to be part of the journey through “green-homes”
and other energy efficiency initiatives

Additional opportunities presented by distributed and renewable generation
Interconnectors – Global electricity networks are increasingly interconnected, enabling
more flexible supply and demand management, access to additional supply and offshore
connection
Energy storage – Storage in the form of BESS and mechanical systems, such as pumped
hydro are in demand for system balancing and frequency control
Hydrogen – Oversupply of renewables can be directly used to produce green hydrogen
Smart grids – Enables advanced metering, demand and supply management along withaccess to small-scale generation that might otherwise be lost

‒ Supports reduction in emissions aligned with reduction in back-up capacity

Insurance COB

Headwinds and key challenges posed to delivery

Success relies on management of fluctuating generation and demand
profiles and the associated engineering challenges

Insurance offerings

IMAGE HERE?

Grid instability – Moving to a decentralised system, with additional low-voltage andintermittent/fluctuating sources increases the risk of wider system instability. This in turndrives a need for reactive compensation equipment increasing the cost of systemmanagement

Aging infrastructure - A 50-year lifespan is common for transmission lines and associatedequipment. Globally, most power grids are aged and already require significant investment.
In the US, for example, power transformers with an average age of more >40 years, currently
manage 90% of all electricity flow
Political pressure - Local government policies may overrule interconnector demands
creating engineering challenge and construction imperative

30
Classification: Unclassified

Overview

Supply chain challenges and natural resource concerns have limited BESS to date, but policy changes, recycling
solutions and advances in technology are unlocking future growth
Global investment breakdown

Investment

Growth drivers
Battery investment,
2025-2030 ($bn)1

Government regulation - Governments, such as the US, are incentivising investment in batteryenergy storage projects. In the US, the Inflation Reduction Act provides Investment Tax Credits
for energy storage systems+401%$419bnValue chain$84bn

National renewable energy policy – In the UK, Ofgem has funded several projects to support
energy storage and China’s “National Demonstration Power Project Management Measures”,
included support for Energy Storage in demonstration projects
Technology advances - Improvements to battery technology are seeing cheaper, more
durable and lightweight solutions enter the market, including NIB and Redox batteries,
alongside Graphene in Li-ion batteries
Headwinds

Insurance COB

Current market trends‒ US: Inflation reduction act allows battery developer easier claim ofinvestment tax credits; plan to install 22GW more capacity by 2026
‒ UK: Has more than 16GW of battery storage currently operating, underconstruction or in the pipeline across 496 projects‒ Australia: Constructing 8 large batteries and 58 community batteries across 4
states to increase capacity and provide grid stability

Insurance offerings‒ India: Developing 7 key grid scale battery projects to help store power during
low demand periods‒ South Africa: Developing 5 new storage batteries in the Northern Cape;building battery storage to improve grid reliability

High cost of production - Prices have been declining, primarily due to technologicaladvancements, but the cost remains high relative to traditional energy storage options. The
upfront investment required can often act as a deterrent to investment and adoption
Geopolitical uncertainty – The conflict in Ukraine has pushed up the price of rare Earthmaterials. Continued or new conflicts may pose further challenges to the industry

Infrastructure costs - Integrating battery storage into existing energy systems andinfrastructure is costly and requires significant investment to ensure safety and compatibility
Supply chain dependencies - Existing supply chains are highly vulnerable. Countries including
the US are seeking to establish more resilient supply chains and reduce its reliance on China,
which currently provides the majority of mineral required

31
Classification: Unclassified

Overview
Investment

Globally $1.7bn is expected to be invested in grid infrastructure between 2021-2025, with most investment
focused on new lines in Europe and APAC
Global investment 2021-2025

Regional investment breakdown 2021-2025

Total grid infrastructure investment(Capex on new lines and replacement),
2021-2025 ($bn)1

Regional breakdown of total grid infrastructure (Capex on new lines and replacement), $m 2021-2025

40%

Value chain

39%

Europe$512m

N. America
$282m

35%
Global$1.7bn

26%

60%

61%

APAC
(excl. China)
$585m

65%

Insurance COB

19%
19%
Lat. Am$81m

Key:

New lines

74%

Africa &Middle
East
$197m

81%

Replacement

Insurance offerings

75%

32
Classification: Unclassified

Overview

Planned electrochemical BESS plants will more than double those currently active across all geographies
Regional electrochemical BESS plant size and status

Global electrochemical BESS
operational capacity

Investment

Global electrochemical battery storage power
output (GW), operational 2023

Europe

3.64

APAC

3.22

China

Value chain

6.91

North America

0.92

LATAM

0.26

Africa and Middle East

0.21

Global power
outputInsurance COB

North America# active plants:
Avg. plant power:1
Avg. plant energy:2922
7.5 mw
29.6 mw/h# planned plants:
Avg. plant power:1
Avg. plant energy:2854
66.6 mw
187.3 mw/hPart operational
12%

Dormant2%

15GW(electrochemical)

Announced
24%

Planned62%

Regional considerations‒ US: The Inflation reduction act has allowed for battery
developer to claim investment tax credits easier as they plan toinstall 22GW more capacity by 2026

Insurance offerings

Regional breakdown of current and planned electrochemical battery storage plants and current status of known plants‒ UK: Has more than 16GW of battery storage (all types)
currently operating, under construction or in the pipeline across496 projects‒ Australia: Are constructing 8 large batteries and 58 community
batteries across four states to increase capacity and provide
grid stability

Europe# active plants:
Avg. plant power:1
Avg. plant energy:2482
7.6 mw
7.3 mw/h# planned plants:
Avg. plant power:1
Avg. plant energy:2585
60.9 mw
131.9 mw/hPart operational
12%

Announced
32%

Dormant
4%

Planned52%

58
4.4 mw
3.3 mw/h# planned plants:
Avg. plant power:1
Avg. plant energy:2

60
78.9 mw
213.4 mw/h

‒ India: Developing 7 key grid scale battery projects to help store
power during low demand periods. India aims to have 140200GW storage capacity by 2040

Part operational
8%‒ South Africa: Are developing 5 new storage batteries in the
Northern Cape, they are not able to build new generation
capacity so are building battery storage to improve gridreliability

Announced
41%

Africa and Middle East
# active plants:
Avg. plant power:1
Avg. plant energy:297
2.1 mw
5.1 mw/h# planned plants:
Avg. plant power:1
Avg. plant energy:2

112
46.5 mw
131.1 mw/h

Partoperational
2%
Planned51%# active plants:
Avg. plant power:1
Avg. plant energy:2362
8.9 mw
12.5 mw# planned plants:
Avg. plant power:1
Avg. plant energy:2

398
197.9 mw
524.7 mw/h

Partoperational
7%

LATAM and Caribbean# active plants:
Avg. plant power:1
Avg. plant energy:2

APAC (exc. China)

Announced
55%

Dormant2%

Planned36%

Planned19%

Announced
79%

33
Classification: Unclassified

Overview

There is a mature global value chain for BESS for end-user self-generation and self-storage, while large-scaleinstallations are dependent on upgrade and evolution of power grids

Insurance offerings

Material mining &processing

Battery cellmanufacturing

Battery cell
assembly

73% of global storage
power output

Electrochemical

1.
2.
3.
4.

Lead acidLi-ionNaS
Flow

9% of global storage
power output

Mechanical

1. Flywheel
2. Compressed Air
Storage
3. Hydro – pumped
storage ​Generation

Electricity transmission, distribution & storage

Grid side applications
End-to-end solution providers for
deployment and operations of BESS’s could
potentially disrupt the market and areaccelerating future opportunities

Applications
Utilities use electric
storage technologies (forpower generated fromfossil fuels andrenewables) in a range ofapplications such as timeshifts and supply capacity
to meet the demandsupply gap efficiently

HardwareFossil fuelSoftwareRenewable energy

Uses/markets

Second life/recycling

Applications
End-users benefit from theefficiencies energy storage
systems offer in time-ofuse energy tariff costmanagement, demandcharge management, anduninterruptible power
supplies

Applications
Batteries used in storage
systems have moresecondary life
applications than in EVs,
as overall performance ismore variable, resulting in
longer lifetimes

Transportation

Selfgeneration

Services
Grid end
users

Distributed
generation

Self-storage

Insurance COB

Value chain

Investment

Energy storage system manufacture

18% of global storage
power output

Thermal

1. Molten salt
2. Ice thermal storage
3. Chilled water
storage

Industrial
uses

Classification: Unclassified

Commercial
andresidential

How this could be used isstill unclear, as thetechnology continues todevelop, and most
systems are 10-20 years
away from expecteddegradation – given thenascency of theirapplication
Recycling
The recycling market iscritical to reducing theenvironmental impacts ofproducing battery material,using heavy mining
processes and toxic
chemicals. However,fewer than 5% of lithiumion batteries are currently
recycled34

Overview

Insurers have developed standalone products for energy storage or integrated them into existing power policies,
but BESS operators will seek increased capacity as more projects commence

Investment(Re)insurance class ofbusiness impact
Accident andhealth‒Cyber

Financial lines

Gaps in coverage currently offered

Property/casualty (operational): operational all risks (OAR), public liability,
employers liability with biggest increased risk from fire including from:‒

Casualty

Value chain

Key coverage sought for projects‒

Thermal runaway – the result of a chain reaction where misused ordamaged battery being to release heat energy, leading to further damage
in a negative feedback loop which can cause build-up of explosive
atmosphere and fire
Failure of BESS control systems - If one or more control component
fails, for instance a battery management system, it can lead to overheating
and fire
BESS and hydrogen evolution - In lead-acid batteries, excess hydrogencan create a risk of explosion unless proper ventilation methods are in
place

‒

Coverage is mostly provided under pre-existing power policies as a property andliability component, if the plant building an energy storage is already in operation
however high-profile fire incidents in the BESS sector, have impacted insurer’s
appetite to provide energy storage cover‒

The current construction market has been hesitant in establishing risk profiles
given the diversity of technologies employed within the battery storage space.
Minimum global standards on construction and increased loss data is needed toassist the industry in pricing‒

For standalone energy storage industrial scale developments, standalone warranty
and liability products have been developed however the market is currently
immature‒

Reasons for this include potential insurability challenges, losses associated with theunproven nature of the technology and the limited availability of battery
performance data from original equipment manufacturer (OEMs)

Insurance COB

Marine, aviation,transport (MAT)
Other (construction): construction all risks (CAR), delay in start up (DSU), supply
chain insurance, terrorism, public liability, political and regulatory risks

Motor

Property
Other (extended warranties): Warranty offered in addition to a standard warranty
typically offered by the manufacturer, providing protection in case of battery failure

Insurance offerings

Other

Other (performance guarantee cover): Cover purchased in conjunction with anextended warranty product that guarantees at least 70% retention of battery capacity
for a given period

Impact
High

Med

Low

-

35
Classification: Unclassified

Overview

The insurance industry is adapting existing warranty and business interruption offerings to BESS solutions
Example market offerings

Insurance offerings

Insurance COB

Value chain

Investment

ProviderProduct description‒

AIG offers coverage for “traditional renewable energy” which includes coverage for onshore wind, solar, hydro, battery
storage‒

These coverages span property, casualty, D&O, and other lines of business‒

BESS CAR and OAR solutions provide specialised P&C coverage for every stage of a battery energy storage project fromdevelopment through operation‒

Axis work with independent power producers, project developers, operators EPCs and utility companies‒

E-mobility insurance means manufacturers and fleet owners are shielded from excessive costs resulting from warranty
claims for their long-term battery warranties by Munich Rr's coverage for e-mobility applications‒

Stationary energy storage solution provides strong protection against excessive repair and replacement expenses
brought on by component failure or unanticipated capacity deterioration‒

Directed at participants along the entire value chain‒ Munich Re uses monitoring by TWAICE software to offer performance warranty insurance for Li-ion batteries‒ Munich Re’s performance warranty insurance policy covers repair and maintenance of battery storage systems and can beextended to cover lost revenue from downtime. The customer is also protected against insolvency and non-payment on thebattery supplier’s side
‒ AXA XL support Paragon Insurance Holdings, a specialist MGA, in offering technology performance and battery revenue
insurance‒

Initially launched in 2022, MS Amlin partnered with Altelium to offer a BESS construction all risk and operational all risk
solution, which has subsequently closed

36
Classification: Unclassified

1

Executive summary

2

Nascent technologies & emerging markets

Carbon markets

CCUS
Low carbon buildings
Batteries and grid

Geothermal

3Hard-to-abate sectors

Overview

Geothermal energy is generally thought to be limited to regions sitting on tectonic plate boundaries, but
growth in ground-sourced heat pumps has demonstrated wider opportunities

Investment

Industry and insurance market dynamics
Energy sourcing andconversion‒ Geothermal energy originates from the heat below the Earth’s surface, using wells toaccess and extract heat from one of two sources; radio-active decay of geologicalelements and heat seeping from the mantle of the Earth’s core
‒ Modern geothermal systems are often integrated to provide combined heat andpower (CHP), using hot steam to generate electricity, while simultaneously supplying
hot water through underground pipes

‒
‒
‒
‒

Transmission and storage

Engineers‒
Construction firms‒
Multinational manufacturers
Plant operators

Grid network
Heat pump vendors

Uses
‒
‒

Community and nationalenergy companies
Private energy companies

Insurance offerings

Insurance COB

Value chain‒ Geothermal energy is thought to be limited to regions sitting on tectonic plateboundaries, but at shallow depths, ground heat derived from the sun can beaccessed by ground-sourced heat pumps‒ Typically resilient to extreme climate events, geothermal as an energy source
provides supply reliability and generates negligible emissions whilst requiring low
water use and low land occupancy

Key growth drivers

Headwinds

Government support

Expensive raw metals

Location specificInnovation

Sustainability

38
Classification: Unclassified

Overview

While district heating systems are a mature technology, there has been a lag in development of the geothermal
solutions due to the costs of accessing heat for power generation
Global investment breakdown

Investment

Growth drivers

Geothermal investment,
2025-2030 ($bn)1

Government support - Geothermal plants act as a good base level electricity and heat generator
to a diversified energy portfolio as they produce a constant fuel through subterranean highpressure steam. In leading countries like Indonesia, Turkey and USA, there are various
government incentives promoting investment in geothermal data gathering, plant setup anddistribution and for geothermal heat pumps in the USA+38%

Value chain

$11bn
$8bn

Insurance offerings

Insurance COB

Current market trends‒ Since 1960, the Geysers Geothermal Field, north of San Francisco, hascontinuously generated commercial geothermal power and is the largest
geothermal plant in the world, with 18 geothermal plants generating ~835MWof electricity‒ In 2020, generation increased by just 2%, falling below average growth of theprevious five years, with the lag in further development of the sector largely
due to development risks and associated costs‒ Globally, generation has grown slowly, at an average of 3.5% CAGR since2015. A gap in global policies to help reduce costs and mitigate
predevelopment risks has limited generation growth‒ In APAC, the Philippines and Indonesia are driving investment, with mostprojects focusing on flash system power plants

Innovation - Enhanced geothermal systems (EGS) is an emerging technology where undergroundreservoirs are accessed through pumping water through impermeable rock. If the method isreproducible, it could significantly increase the accessibility of geothermal power. US investment
syndicates are exploring methods of retrofitting oil and gas wells to become productive geothermal
sources. Similar research is placed into unproductive geothermal plants
Headwinds
Expensive raw metals - Each geothermal construction project requires a customised turbine
design to fully leverage the amount of steam generated by the underground reservoir. The plant isthen shaped around the turbine, so geothermal power stations aren’t reproducible at commercial
scale. Rare earth metals are required in system manufacture, making geothermal more expensive
than traditional power plants. As geothermal powerplants are highly location dependent, there islimited availability
Location specific - Geothermal plants need to be built in specific areas where geothermal energy
within underground reservoirs are accessible, which means that some areas are not able to exploit
this resource
Sustainability - To maintain the sustainability of geothermal plants, fluid needs to be pumped
back into the underground reservoirs faster than it is extracted, otherwise risk depletion

39
Classification: Unclassified

Overview

The value chain for extracting heat from below the Earth’s surface for heat, power or combined (CHP) has lesscomplexity than many other green technologies and fewer stakeholders

Investment

Energy source

Value chain

Deep undergroundreservoirs

Insurance COB

Ground heat
derived from thesunConversion (to heat and/or power)
Binary cycle (Power)
Uses hot water to boil a working
fluid with a low boiling point. The
working fluid is vaporized in a heatexchanger and used to turn aturbine.

Transmission and storage

Transfer to local grid throughstep up transformer at plant

Double flash (Power)
Hot water, ~180°, flows up throughpipes under its own pressure, as thepressure decreases it turns tosteam to drive a turbine.

Uses/markets
End-use is primarily electricity
generation, ground heatpumps are used for heating

Geothermal energy can be used
to heat buildings all year round,used in 70 countries. However, amore popular air source heatpump has emerged which
accounts for 80% of sales

Dry steam (Power)
Steam is piped from undergroundwells to the plant where it isdirected into a turbine.
Ground heat pumps (Heat)
Uses hot water to boil a working
fluid with a low boiling point. The
working fluid is heating the building
through radiation.

Insurance offerings

Key example stakeholders‒ Engineers‒ Construction firms‒ Multinational manufacturers‒ Plant operators – both private andgovernment owned‒ Grid network‒ Community and national energy companies‒ Heat pump vendors‒ Private energy companies

40
Classification: Unclassified

Overview

The exploratory phases of geothermal projects can present the most material risks and potential cost increases

Investment(Re)insurance class ofbusiness impact
Accident andhealthKey coverage sought for projects

Gaps in coverage currently offered

Property: Traditional property cover, machinery breakdown and businessinterruption are important. High machine break down exposure, given the site
locations​ being in fault zones prone to seismic activity and maintenance-related
issues such as the corrosion of wellheads, casings, and pipelines, hydrogen-related
embrittlement, and out-of-production wells which could also impact operations

Casualty

Value chain

Cyber

Financial lines

Insurance COB

Marine, aviation,transport (MAT)

Motor

Property damage and business interruption cover exists for machine breakdown
and site related risks‒

Enhanced geothermal systems, is an emerging technology where undergroundreservoirs are accessed through pumping water through impermeable. Despite its
potential advantages, risks related to this technology are out of insurers’ appetite as
the method could increase the chance of earthquakes. More research is needed inthis area‒

Government backed insurance schemes and the World Bank initiative, GeoFund,offered coverage to most countries in Europe, but all have now expired‒

There is insurance coverage that exists in the market to mitigate financial loss
due to failure of exploratory drilling however, due to the small number ofprojects, financing and insurance solutions are limited‒

Damage to third party property, environmental risks such as chemical spills
during operation and coverage for bodily injury resulting from these exist‒

There are tailored and comprehensive solutions available however the number ofcarriers and products are limited due to small number of geothermal projects

Additionally, “finder’s risk” insurance, or “exploration risk” covers the risk of not
finding a geothermal energy source at a given site
Property

Casualty (environmental): Various natural gases stored under the Earth’s surface
are released into the atmosphere during the operational drilling. The rate at which thegas is emitted increases near geothermal plants, therefore emissions need to bemonitored and maintained

Other

Insurance offerings

Property/Casualty: (Drilling and geological hazards): Due to unknown conditions
underground, during drilling and construction a site may be subject to well instability,
risk of casing collapse, damage to the bottom hole assembly, blowout, andcontamination of adjacent ground water resources. When equipment is damaged or
unrecoverable, financial risks increase for project principals since drilling equipment
rental agreements always include a “new-for-old” stipulation, regardless of the causeof the loss.

‒

Impact
High

Med

Low

-

41
Classification: Unclassified

Overview

Products already exist to support geothermal projects, and the insurance industry is well placed to enable thetransition of assets through retrofitting as the technology becomes proven
Example market offerings

Investment

ProviderProduct description‒ Renewable energy insurance solutions provide coverage for renewable technologies who have risks ranging frommechanical breakdowns to natural hazards‒ Solutions include construction and erection all risk, operational all risk and third-party liability‒ These solutions include delayed start up and business interruption

Value chain‒ Geothermal resource risk insurance covers a pre-determined number of wells with a pre-agreed drilling and testingschedule, removing reservoir output risk during the initial development drilling phase‒ As a result, it provides protection for project developers’ and third parties’ equity and encourages the influx of private equity
and other third-party capital to finance the development stages of reservoirs‒ Munich Re has provided geothermal exploration risk insurance in Kenya, making the project’s financing easier to scheduleand more reliable

Insurance offerings

Insurance COB‒ In early drilling phases, if the targeted reservoir is unable to produce enough output in steam or heat, project is usually
discontinued so multi-well exploration risk insurance covers such resource risks to help ambitious projects be realised‒ Insurance policy covers the cost of surveys for hot spring operators to determine if geothermal power stations are altering
the quality and composition of hot spring water

42
Classification: Unclassified

1

Executive summary

2

Nascent technologies and emerging markets

3

Hard-to-abate sectors

Agri-business

The insurance industry currently provides climate resilience to the agri-business sector, but incentivisingproduction changes could accelerate 25% of identified carbon abatement opportunities
Line of business

Number ofsolutions1

FL, incl. credit and surety

29

Property

27

Liability (incl. D&O and BI)

22

Energy19

Agribusiness: Agriculture significantly contributes to global emissions with practices differing greatly by geography.
Identified abatement measures range from consumer dietary changes to supply-side efficiencies including production
practices. Combining production changes and electrifying farming vehicles could unlock 25%of abatement options

Abatement
measureAviation

Shipping

Diet shifts
Construction and engineering

15

Agri-business

6

Motor (fleet and personal)

4

Alternative Soln. e.g. advisory

4

Cargo and logistics

1

Marine (hull, P&I)

0

Aviation

020+ solutions

10-20
solutions<10 solutions

Animalproteinproduction

Net-Zeroemissions2

Development outlook‒

Consumption of carbon intensive ruminant animal proteins (namely lamb and beef)
would have to fall by 45% in the Net-Zero pathway‒

Animals’ GHG emissions could be reduced through selective breeding, feed-mix
optimization and methane/nitrification inhibiting additives in feed

-39%

-13%

Crop
production-9%‒

Less pollutive crop production practices would include low/no-tillage production,
improved fertilization practices and better water & irrigation management

Reduction infood waste-8%‒

Food waste and loss would need to fall 13% to a 20% global average by 2050

Electrification-3%‒

Electric farm vehicles fully replace internal combustion vehicles by 2050 under the
Net-Zero pathway as they are predicted to not only abate carbon but also save costs​

0 solutions

44
Classification: Unclassified

Agri-business
Shipping

Insurers have an opportunity to form sector-based partnerships which encourage behavioural change to bettersupport the EU objectives and other sustainable goals

Market groups tackling the issue…

Working with market groups..

‒

To establish the SMI’s Agribusiness Task Force (ATF),
the former Prince of Wales gathered executives fromsome of the biggest agricultural corporations‒

The insurance industry could look for opportunities to form sector-based
partnerships which encourage behavioural change to better support the EU
objectives, or other sustainable goals such as the UN SDGs‒

Its goal is to expedite the adoption of regenerative
agriculture as the world’s primary agricultural system‒

Through insurance solutions that minimise risk and actively promote adoption, there
is a chance to enable investment and incentivise regenerative farming‒

The members worked together last year to determine
what steps the business sector might take to create
scalable value chain blueprints to accelerate thedeployment of regenerative technologies‒

The European Carbon+ Farming Coalition will employ a
farmer-centric approach with partners focusing on
promoting the adoption of regenerative and climatesmart agriculture practises, identifying the barriers to
adoption, and devising solutions with advantages forfarmers in terms of economics, practicality, and theenvironment

Aviation‒‒‒

Additionally, it will seek to provide financial instrumentsthat farmers may use to manage transition risk andsuggest the best combination of farmer incentives‒

There is a longer-term/future opportunity to offer farmers insurance on
conditions that lessen the cost of converting to and sustaining a regenerative
systemThe insurance industry can also support on wider actions:‒

Encouraging the deployment of enabling technology, where these newtechnologies can promote regenerative farming practices and, in somesituations, act as a crucial enabler, through the provision of insurance
solutions for these technologies or strategic partnerships with techcompanies‒

Ensure everyone working in the value chain is aligned to promoting
regenerative farming over conventional farming practices, performancemeasurements could be linked to environmental objectives

Additionally, the industry should prioritise working with Agricultural clients onprotection of biodiversity and ecosystems and water use

45
Classification: Unclassified

Agri-business
Shipping

Efficiency retrofits and the development of new propulsion methods such as biofuels and hydrogen will requirecontinued support from the insurance industry
Line of business

Number ofsolutions1

FL, incl. credit and surety

29

Property

27

Liability (incl. D&O & BI)

22

Energy19Construction and engineering

15

Agri-business

6

Motor (fleet & personal)

4

Alternative Soln. e.g. advisory

4

Cargo and logistics

1

Marine (hull, P&I)

0

Shipping: In 2021 international shipping accounts for ~90% of global trade volumes ($14tn). Reaching net zero by2050 will require ~15% reduction in emissions by 2030, for which an estimated $5bn is required in the immediate term
to advance alternative technologies

Abatement
measureNet-Zeroemissions2

Hydrogen-19%

Bioenergy

-19%

-14%

Energyefficiency

Electrification

Aviation

Aviation20+ solutions

10-20
solutions-4%

Development outlook‒

Low-carbon fuels account for ~45% of fuel intake by 2050, with hydrogen constituting alarge portion of this but long vessel lifetimes may delay adaptation‒‒

Design and implementation of engines powered by ammonia and other biofuels
First hydrogen and ammonia powered vessels due to come into operation in 2023‒‒

Energy efficiency must improve from 30 to 35% by 2050 to reach Net-Zero
Shipping has had limited investment in zero-emission technologies to date, however
retrofitting to meet regulations and improve fuel efficiency/costs is a mainstream
activity‒‒

From 2030, ferries and other vessels for short-sea shipping would be electrified
Technologies to decarbonise shipping are at early stages of maturity with R&D ongoingin alternative fuels, electrification and hydrogen‒

Slowing demand growth driven by a 40% reduction of oil tankers as oil usage
decreases

0<10 solutions

0 solutions

Shipping
demandreduction-4%

46
Classification: Unclassified

Agri-business

The insurance industry has a unique opportunity to work with marine market groups to learn and evolve existing
offerings

Market groups tackling the issue…

Working with market groups..

‒‒

Shipping‒‒‒

Aviation‒

The ‘Maritime Just Transition Task Force’ was set up by
the ICS, the ITF, the UNGC, the ILO4 and the IMO5
during COP 26
First sectoral task force devoted to solving the climate
emergency in a way that is as fair and inclusive as
possible, whilst creating good work opportunities
Seeks to increase and coordinate cooperation in orderto move the shipping industry towards decarbonization
in a safe, equitable, and people-centred manner
between governments, business, labour, academia, etc.
Allianz has partnered with Sea Shepherd, who fight todefend, conserve and protect the ocean. Last year, theycollected 12 cubic metres of garbage made of plastic
and polypro
By deploying its fleet of ships to follow, monitor, andactively obstruct the activity of fishing vessels suspectedof engaging in illegal and unreported activities that leadto the unsustainable exploitation of marine life, Sea
Shepherd is perhaps most known for adopting direct
action techniques to achieve its aims

‒

‒

‒

‒

‒

‒

The insurance industry has an opportunity to focus investments or partner with
innovators to facilitate the 4th propulsion revolution
This includes opportunities to form sector-based partnerships which encourage
behavioural change to better support the EU objectives, or other sustainable goals
such as the UN SDGs
With decarbonisation for shipping focused on purchasing offsets to compensate
emissions, growth in carbon market offerings could increase coverage in hard-toabate sectors
Opportunities arising for insurance companies:‒ Liability coverage for failing carbon offsets‒ Coverage of risks related to the use and stock of hydrogen and ammonia inshipping‒ Liability insurance against increasingly demanding energy efficiency standards
There is a short-to-medium term opportunity to adapt Marine insurance products tocover retrofits for current regulations and fuel efficiencies, for example asset
performance products covering performance shortfall
Given the nascent nature of the market, learnings are limited, leaving opportunity forprofitable products specific to those technologies mentioned earlier (e.g. hydrogen,bioenergy and electrification) as a longer-term opportunity
Increasing carrier propositions as limited carrier propositions have been observed so
far e.g. Gard providing P&I and Hull & Machinery cover to Yara Birkeland, the world’s
first autonomous and zero-emission vessel, in 2021

47
Classification: Unclassified

Agri-business
Shipping

The insurance sector is well placed to support the aviation transition pathway through innovative solutions andpartnerships

Market groups tackling the issue…

Opportunities for the sector..

‒

The SMI’s Aviation Task Force (ATF) is coordinating
efforts to ensure that aviation reaches net zero
emissions by 2050‒

The insurance industry could explore opportunities to form sector-based partnerships
which encourage behavioural change to better support the EU taxonomy objectives,or other sustainable goals such as the UN SDGs‒

While it is feasible to fly without using fossil fuels, effort
is needed to make alternatives like SAFs a reality‒

Funding and financial de-risking for the promotion of continued innovation andresearch into Sustainable Aviation Fuels (SAF) is required‒

The ATF launched a SAF pocket guide at COP27 topromote adoption within the business community andsupport the goal of using 30% SAF in corporate travelby 2030‒

Improving efficiencies requires joint efforts from a large group of stakeholders but an
opportunity exists for the ITF to collaborate with the Aviation Task Force (ATF) toaccelerate fuel efficiencies‒

Potential opportunities for insurance companies:‒

The International Air Transport Association (IATA)
members have committed to achieving net-zeroemissions from their operations by 2050‒

Traditional coverage for SAF producers (e.g., biofuels distributors)‒

Insurance for SAF supply chain disruptions for airlines

This comprises of coordinated efforts of the entire
industry and significant government support, enabled by
CORSIA‒

Liability coverage for failing carbon offsets‒

Aviation‒

To address emissions from international aviation, theInternational Civil Aviation Organisation (ICAO) adopted
the Carbon Offsetting and Reduction Scheme forInternational Aviation (CORSIA), marking the first time asingle industry agreed to a global-market based
measure in the field of climate change‒

Similarly, by having insurance solutions in other areas such as coverage foralternatives such as high-speed railways, can reduce the demand on aviation, further
reducing emissions‒

Decarbonisation for aviation is for now focused on purchasing offsets to compensate
emissions ​so growth in carbon market offerings could increase coverage in hard-toabate sectors

48
Classification: Unclassified

Notes & Sources (1/3)
Page number

Source

Notes

7

IEA; International Council on Clean Transportation; McKinsey Insights: Scaling the CCUS industry to achieve netzero emissions; Global Data; McKinsey; UN PRI

1. The total 2025 global market size estimates for both operational and capital expenditure wereobtained from IEA Net Zero and UN PRI Forecast Policy Scenarios

8

Carbon Offset Guide; California Air Resources Board; EY; EU ETS; Center for Climate and Energy Solutions:
Secondary Carbon Markets; ISDA: Role of Derivatives in Carbon Markets

1. Subject to product designs adhering to regulatory guidance and requirements

9

Carbon Offset Guide; California Air Resources Board; EY; ISDA

1. OTC – “Over the counter” direct trading, 2. Emissions Trading System, 3. Regional Greenhouse
Gas Initiative – “Cap-and-invest” scheme, 4. California allows 4% carbon offset credits, rising to 6%
in 2026;

10

IEA

1. According to the Net Zero Scenario

11

Carrier websites; company websites

1. Subject to product designs adhering to regulatory guidance and requirements

12

Carrier websites; SMI ITF 2022 products and services showcase; IEA; UN PRI

1. Product not yet launched

14

IEA; International Council on Clean Transportation; McKinsey Insights: Scaling the CCUS industry to achieve netzero emissions; Global Data; McKinsey; UN PRI

1. The total 2025 global market size estimates for both operational and capital expenditure wereobtained from IEA Net Zero and UN PRI Forecast Policy Scenarios

15

IEA

1. According to the Base Case – Forecast Policy Scenario (UN PRI)

16

TFM Data; Global Data; IEA; IRENA

Investment figures shown are based on Base Case – Forecast Policy Scenario (UN PRI) only

17

GlobalData; US Department of Energy

Pipeline figures are based on projects completed but not currently in use, currently underconstruction and future projects that have been announced

18

Global Data; IEA; Company websites

19

Global Data; IEA; Carrier websites

1. Subject to product designs adhering to regulatory guidance and requirements

20

Carrier websites; SMI ITF 2022 products and services showcase; Climeworks; UN PRI; IEA

1. SPILLS – Site Pollution Incident Legal Liability Select; 2. CELL – Contractors Environmental
Legal Liability

21

IEA; UN PRI; GlobalData

1. Heating includes heat pumps, solar thermal and biomass

22

IEA; International Council on Clean Transportation; PwC

1. Another key element to building retrofits and green buildings is use of green materials which is
not included in our model 2. According to the Base Case – Forecast Policy Scenario (UN PRI)

23

The Building System Carbon Framework; McKinsey: Climate risk and the opportunity for real estate

24

McKinsey; IEA; UN PRI

49
Classification: Unclassified

Notes & Sources (2/3)
Page number

SourceNotes

25

McKinsey; IEA; UN PRI

26

IEA; UN PRI; Carrier websites; SMI ITF 2022 products and services showcase

1. Percentage split according to the Base Case – Forecast Policy Scenario (UN PRI)

28

IEA; International Council on Clean Transportation; IEA; UN PRI; GlobalData

1. Batteries includes grid, EV charging and EV battery manufacturing; 2. Grid includes replacement
only and excludes new lines

29

IEA

30

IEA; Energypost; S&P Global; Financial Times; U.S Department of Energy; Reuters

31

IEA; International Council on Clean Transportation; GlobalData

1. According to the Base Case – Forecast Policy Scenario (UN PRI) with battery here including
grid, EV charging and EV battery manufacturing

32

IEA; GlobalData

1. Expected Capex investment is based on the Net Zero Scenario (IEA). Excludes China.

33

GlobalData

1. Power rating (measured in megawatts) indicates how much power can flow into or out of thebattery in any given instant; 2. The energy rating (measured in kilowatt-hours) is the amount ofenergy that can be delivered or absorbed over the course of an hour

34

IEA; International Council on Clean Transportation; S&P Global; EVGO; Manufacturer websites

1. The Group Rating Panel, administered by Thatcham Research, assigns new car models to an
insurance group from 1 (cheapest to insure) to 50 (the most expensive).

35

Aon analysis

36

SMI ITF 2022 products and services showcase; Carrier websites

38

Global Geothermal Alliance; Global Data; IRENA; International Energy Agency; World Energy Investment;
Bloomberg

39

IEA, Global Data; TFM Data; IRENA; DECC; USGS

40

Global Data; IEA; IRENA; Company websites

41

Aon analysis

42

ITF 2022 products and services showcase; Carrier websites

1. Based on a Net Zero Scenario

44

McKinsey; IEA; Princeton University; Global Business Travel Association; SMI

1. Numbers in the heatmap refer to number of solutions from SMI Insurance Task Force members,
with some solutions in multiple pillars or lines of business; 2. Change Vs. reference case in 2050​

1. Percentage split according to the Base Case – Forecast Policy Scenario (UN PRI)

1. According to the Base Case – Forecast Policy Scenario (UN PRI)

50
Classification: Unclassified

Notes & Sources (3/3)
Page number

SourceNotes

45

SMI: Agribusiness Task Force; European Institute of Innovation and Technology

46

McKinsey; IEA; Princeton University; Global Business Travel Association; SMI; IMO; UN Global Compact; ICS

1. Numbers in the heatmap refer to number of solutions from SMI Insurance Task Force members,
with some solutions in multiple pillars or lines of business; 2. Change Vs. reference case in 2050​

47

McKinsey; IEA; Princeton University; Global Business Travel Association; SMI; IMO; UN Global Compact; ICS

1. International Chamber of Shipping; 2. International Transport Workers’ Federation; 3. United
Nations Global Compact; 4. International Labour Organization; 5. International Maritime
Organization ​48

McKinsey; IEA; Princeton University; Global Business Travel Association; International Air Transport Association(IATA); SMI

51
Classification: Unclassified

Disclaimers
This document is not intended for distribution to, or use by, any person or entity in any jurisdiction
or country where such distribution or use would be contrary to local law or regulation. It is the
responsibility of any person communicating the contents of this document, or any part thereof, toensure compliance with all applicable legal and regulatory requirements.
The content of this document does not represent a prospectus or invitation in connection with any
solicitation of capital by Lloyds. Nor does it constitute an offer by Lloyd’s to sell securities orinsurance, a solicitation of an offer to buy securities or insurance, or a distribution of securities in
the United states or to a U.S. person, or in any other jurisdiction where it is contrary to local law.
Such persons should inform themselves about and observe any applicable laws.
This document has been produced by Lloyd's and Aon plc or its affiliates ("Aon") for general
information purposes only and is not intended to address the circumstances of any particular
individual or entity.

© Lloyd’s 2024

While care has been taken in gathering the data and preparing this document, Lloyd's and Aon do
not make any representations or warranties as to its accuracy or completeness and expressly
excludes to the maximum extent permitted by law all those that might otherwise be implied.
Lloyd's and Aon accept no responsibility or liability for any loss or damage of any natureoccasioned to any person as a result of the acting or refraining from acting as a result of, or inreliance on, any statement, fact, figure or expression of opinion or belief contained in thisdocument. This document does not constitute advice of any kind.
No one should act on this document without appropriate professional advice after a thoroughexamination of the particular situation. Any recipient shall be entirely responsible for the use towhich it puts this document. This document has been compiled using information available to us
up to its date of publication.

52
Classification: Unclassified