Surging renewable energy projects unleash insurance challenges
Market Insight 25 January 2024 25 January 2024
Asia Pacific, North America, UK & Europe
Predictions 2024 - Climate Change
Increase in demand for insurance professionals to underwrite risks and manage claims expected
With the benefits of the Inflation Reduction Act now starting to be realized, renewable energy projects are predicted to expand rapidly, driving a growing need for insurance as well as an expected influx of claims.
Rapid growth in renewable energy is not limited to large-scale commercial projects. Reliance on renewable energy is becoming more mainstream as individuals increasingly employ the use of alternative localized power sources such as solar panels and battery storage to meet energy needs, and as a result, become less reliant on the traditional energy grid.
This shift to the reliance on renewable energy at an individual level will result in a fundamental change in the way we insure the energy infrastructure. This could be particularly difficult in today’s challenging property insurance market where a rise in outsized losses has made insurance difficult, if not impossible, to obtain in areas deemed prone to natural disasters, with insurers having restricted coverage or withdrawn altogether.
From a claims perspective, it follows that more renewable energy projects will mean more claims. We anticipate claims tied to smaller, localized infrastructure with less redundancies built in to become more frequent, but less costly. Although less frequent, we would expect to see large, expensive claims on the commercial public infrastructure side. In other words, the more infrastructure, the more expensive it's going to be when something goes wrong.
The good news is that more renewable projects means more and better data available for insurers to use to accurately price risks. We expect to see a rapid increase in demand for insurance professionals skilled in interpreting data to underwrite renewable risks and manage the claims.