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23 March 2020
Rapid growth and changing risks in renewables energy signal a growing need for insurance in the sector, research from Lloyd’s reveals.
Renewable energy sources have expanded so much in a decade they are now the dominant source of new additions to power capacity in many countries.
Three reports by Lloyd’s and the Imperial College London analyse the implications for insurers, risk managers and brokers of these significant changes to energy generation.
“In the future, renewable energy systems are likely to start to meet production demands that traditional energy systems do today,” Lloyd’s says.
“Due to the changing nature of risks in the sector and the fact that insurance is often a pre-requisite for securing project finance there is a growing need for insurance to support the rapid growth in the renewables industry.”
The report says climate change policies and rapid technological changes are driving the fundamental shifts in energy systems across the world.
Vulnerability to weather risks is increasing due to new projects being cited in suboptimal, more exposed locations – for example, on floodplains – because prime sites have already been used, especially in more mature markets. This results in projects being exposed to more losses and insurers having to carefully consider underwriting and premiums.
As the sector matures, developers, contractors, finances, suppliers and site owners will need to move beyond the current “single-minded focus” on cost reduction to include project quality and reliability, with better strategies for managing and mitigating risks.
“Recent events combined with regulators’ focus on climate change will prompt insurers to analyse risk exposures more thoroughly, considering not only exposure to potential property damage, but also to issues that could impact sites accessibility, slow re-connection to the grid and site security expenses,” Lloyd’s says.
The ‘Risks and technologies’ report, one of three published, explains how Lloyd’s is responding to six risks associated with renewable energy.
Read the reports here.