Natural catastrophe exposure and ageing assets are among a list of challenges facing the renewable energy insurance market this year, according to a Willis Towers Watson (WTW) report.

Other challenges listed by the broker include hiring of inexperienced contractors, lender obligations, escalating use of new technology and impact of COVID-19 on the renewable sector.

While insurers have injected fresh underwriting capacity into the market, concerns over these challenges will impact their risk appetite.

“The relationship between the renewable energy insurance market and developers, owners, operators and investors in assets producing green, clean or low carbon power is becoming increasingly challenging,” WTW says in the report.

“This challenge is resulting from the rapid deployment of new technology and projects installed in new locations, coupled with the maturity of other projects.

“While capacity providers may publicly announce their ability to write business, pointing to their lack of treaty restrictions and their commitment to the sector, it’s unlikely that the floodgates will open to all technologies, insurance product lines and generating assets.”

WTW says natural catastrophe risk is probably the single greatest challenge to renewable energy community assets around the world.

“The historical exposure and losses sustained to renewable energy installations has made insurers reassess their understanding of maximum potential loss, the level of risk to which they wish to be exposed, their capacity deployment and their pricing,” the broker says.

For example, natural catastrophe claims for onshore wind projects have increased since 2010. In 2016 these losses cost insurers nearly $US80 million ($103 million).

“For insurers involved in the market for the last 10 years, it would be fair to conclude that there has been a slow maturing of claims knowledge as real volume loss data has become available,” WTW says.

On COVID-19, WTW says it is widely accepted that insurers will be applying exclusion clauses in the future.

“The insurance market has a reputation for adapting to the environment and issues of the day and this time is no different,” it says. “However, we are witnessing a hardening market across the globe, so insurers have been quick to recognise the danger.

“They have therefore been reacting quickly to introduce COVID-19 exclusionary language. The urgency in the market has been compounded by natural catastrophe disasters that often batter insurers towards the end of the year, so COVID-19 has added another layer of caution.”

Click here for the report.