When it comes to insurance, the evolving nature of the renewable energy industry, combined with the relatively small size of the market, can make for a challenging environment for both smaller scale operator/owners and larger corporate/investment.
Insurance for renewable energy projects
It has been challenging for insurers to analyse historical data and develop accurate models of risk – which, in the early days, led to risks being underestimated and premiums were priced too low. As the deployment of new, quickly evolving and untried technologies emerge, it makes it difficult for the renewable energy sector to get a handle on their future operational effectiveness and consistency. This impacts trying to place insurance for some renewable energy projects.1
As a result, a smaller pool of insurers, operating with a high degree of caution, has seen the market harden over recent years – a situation that continues today.2 This of course, brings challenges for renewable energy insurance buyers as a hard market means rising premiums and a reduction in the supply of insurance as insurers become reluctant to write policies.
Issues impacting renewable energy premiums
- Developing technologies mean the market is still changing quickly.
- Wind and solar projects remain vulnerable to mechanical and electrical breakdown in a period of continued technical innovation in the sector – raising operation and maintenance costs.
- Across the globe, projects are becoming increasingly vulnerable to extreme weather conditions – floods, storms, theft and fire claims are typically more numerous.
- Risks can be high and not always understood when planning/ building of projects such as anaerobic digestion plants.
The future of the renewable energy market
Looking ahead, it is unlikely things will change in the short term – particularly with insurers under increasing pressure to return to profitability this year. With policy exclusions, changes in terms and conditions across all assets, and insurers paying close attention to out-of-warranty parts and equipment, we have seen a significant retraction in capacity. Certainly, today’s market looks challenging for buyers.
Good news for Electronic Vehicle Charging Points (EVCP)
On a more positive note, in the connected sector of electronic vehicle charging points (EVCP), there is a good market appetite for EVCP insurance. Here at least, the technology is proven and not subject to the kind of extreme weather, component damage or costly replacement we see elsewhere in the sector. There are exposures around cyber-risk, but the most significant risks relate to damage from vehicles or vandalism. With protective barriers erected around the majority of charging points, and little evidence of the latter, premiums are low and insurers are happy to take on the risk.
Navigating the challenging renewable energy market
In order to help mitigate the impacts of today’s challenging insurance market, it is imperative to begin exploring insurance options at the very beginning of the project. If you have any queries regarding the challenging renewable energy insurance market, ask our renewable energy insurance experts a question, they’re here to listen.
This article is taken from a chapter within our Renewable Energy 2020: protecting your investments in a challenging market eBook. Download the full eBook today.