Search Menu Insights Airmic 2021 Insights with Warren Diogo: Renewables on the Rise September 28, 2021 By Warren Diogo, Head of London Market Renewable Energy at Sompo International Climate change is moving up the risk management agenda as extreme weather has grabbed headlines around the world, often with deadly consequences. Catastrophic flooding in Germany, China and Australia, record-breaking snowfall in Madrid, unprecedented winter storms in Texas, record temperatures in Moscow and wildfires from Greece to California. The list goes on. As leaders gear up for COP 26 in Glasgow in November, 128 of the world’s largest investors – controlling US$43 trillion in assets – are now committed to a net zero emissions target. Unsurprisingly, against this backdrop, focus on – and investment in – renewable energy continues to intensify. These developments are having an impact on industry and the insurance market. Shifting market dynamics The green energy transition has resulted in a clear move by the oil and gas majors into renewables. This has had a knock-on effect on the insurance market – underwriters now need to be able to underwrite across the energy portfolio: upstream, downstream, operational power and renewables. As traditional upstream energy activity declines, those insurers that may have previously focused on oil and gas business are now moving into renewables. As renewable energy projects increase in size and complexity, we will see a greater need for packaged policies with large exposures (increasingly with Critical Cat) being placed on a verticalized basis. However, at the same time as the renewables market is accelerating, it has been suffering with significant and complex claims – including weather-related losses which are estimated to have risen three-fold in the past decade. Getting to grips with the issues Everyone involved in the market needs to embark on a learning process to understand past trends and get to grips with rapid developments in the market. The renewables sector is constantly evolving with technological advancements to reduce costs and improve efficiency. For example, in the solar market, increasing competition has meant that costs have fallen to such a degree that question marks are being raised over the design considerations, quality of components and the competency of contractors and operations & maintenance providers. A number of large losses due to hail, wildfire and storm damage mean that claims have risen significantly, for example technical issues have emerged around the effectiveness of solar panels to stow in order to protect against adverse weather conditions. In the offshore wind market, subsea cabling (a long-standing Achilles’ heel) has recently suffered from further defective design and workmanship issues that could lead to losses running into hundreds of millions of dollars. And in onshore wind farms, there have been a material number of catastrophic turbine failures due to hub locking pins located at the top of turbines not being fully disengaged. We have also seen concerning trends of blade failures and lightning strikes which in some cases continue to re-occur on the same units year after year. Ensuring coverage is fit for purpose In the face of emerging trends and shifting weather patterns – and therefore risks – due to climate change, insurance policies need to be unambiguous and respond effectively. Sompo International is actively involved in several London Market working groups with a focus on the introduction of new clauses into insurance policies to clarify coverage intent and application in the context of emerging developments. Key areas of work address a number of the issues above including: Wildfire Mitigation Minimum Standards – to address amongst other items vegetation management and fire suppression; Hub Locking Pin Guidance – to ensure all pins have been safely, verifiably and fully disengaged; Microcracking Endorsements – to address increasing frequency and quantum of losses attributable to microfractures/microcracking within solar photovoltaic (PV) technology; and Serial Loss Clauses – application enhancements and differentiated cover for serial losses. The renewable energy sector continues to present a challenging risk profile and this is destined to become more complex as the industry evolves. For coverage to be available in the long term, prices need to more accurately reflect the claims experience. It is crucial that underwriters, brokers and risk managers work together to ensure that a stable and sustainable market is available so that it can effectively support the transition to renewables. Other Insights Sompo International Spotlight Series: Meet Fernando Gonzalez, Vice President, Multinational Business Unit Industry Experts Weigh in on Deploying Capacity for the U.S. Property Market in 2022 Risk A/T® Work Newsletter Issue 37 (English): Are You Ready for When the Freeze Comes? Climate change protest could be the ‘next pandemic’ for the crisis management market ALL INSIGHTS Related Media Center News Advertising Media Center Home Sompo International ©2021 Sompo International Holdings Ltd. Terms of Use | Privacy Policies | Modern Slavery Act Statement You may opt-out of receiving cookies by changing your internet browser setting. 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