Renewable energy market facing further hardening; challenges triggered by climate change: WTW

The renewable energy market is facing further hardening as insurers seek to capitalise on last year’s pricing increases, according to a new report by  Willis Towers Watson (WTW).

The report revealed that global markets experienced increases between 10 percent and 40 percent, with casualty rating experiencing more significant increases.

WTW's Renewable Energy Market Review identified the impact of climate change and the subsequent transition to renewable energy and low-carbon initiatives, as well as the growing Environmental Social Governance (ESG) pressures, as key factors that are likely to transform the renewable energy industry risk landscape.

The report also highlighted several key challenges besetting the renewables insurance market. This includes aged assets, operation, maintenance and spares, natural catastrophe risk, contractor experience, lender obligations, the pace of technological change and COVID-19 related supply chain interruption risks.

Graham Knight, head of global natural resources at Willis Towers Watson, said the renewables industry faces risks and challenges from all sides as impacts the global economy and insurance market conditions harden.

“However, it is the issue of climate risk and ESG that will have a more significant impact on the future shape of the industry,” he said.

Knight believes renewables companies must develop a significant ESG footprint and incorporate climate change risk into their risk mitigation strategies in order to survive in the future.

“Renewables companies need to know how the energy transition is going to affect their industry, why climate change is already transforming their industry risk landscape, how they can play a strategic role in developing their response to this transition and which ESG pressures are going to affect the industry in the future,” he said.

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