Unmodelled extreme weather risks are a “defining challenge” for renewable energy markets, according to sector underwriter GCube Insurance.

“Across Europe, the Middle East and Australia, the renewables sector recognises the increasing climate-driven risks but, due to modelling and data shortfalls, the full scale and complexity of those risks remain unclear,” said CEO Fraser McLachlan, who wants closer collaboration between insurers and financiers, and updated catastrophe modelling.

In the US, some developments are struggling to secure financing because of coverage gaps and rising costs. In Australia, rapid expansion into new regions increases exposure to bushfires, cyclones and hailstorms.

A report by GCube – which has an office with parent company Tokio Marine in Sydney – cites a project in a flood-prone area that had an insurance policy that excluded flood, forcing developers to find coverage elsewhere. 

German bank NORD/LB’s director of structured finance energy origination Cecile Luciano said: “We are seeing more engagement between lenders, insurance advisers, brokers and developers to ensure that policies are bankable from the start.

“This needs to happen early in the process, ideally before construction insurance is finalised.”

Mr McLachlan says if the market fails to respond now, insurability and bankability may become major barriers to growth.

“North America has long been the focal point of these challenges, but it is now evident that this has become a global issue,” he said.

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