New insurance providers are entering the Australian renewable energy market, fuelling an “increase in competitive tension”, but concerns over catastrophe losses may stall the easing of rates, global broker WTW says.

In the past year, clean power projects have grown in scale and complexity to meet the federal government’s 2030 target of having renewables make up 82% of energy supply.

However, natural catastrophe risks are front of mind for insurers, with global and local hail losses leading to heavy restrictions on solar portfolios and driving the need to seek global capacity and support to build sustainable limits.

“This has led to increased scrutiny on the risk management and mitigation processes in place for developers and contractors,” WTW’s Australasian renewable energy leader John Rae says in a report.

“Alongside hail, bushfire and windstorm risks continue be a concern for local insurers, particularly noting the introduction of concentrated renewable energy zones where we see heavy development in natural catastrophe-prone areas and the risk of a high or full-limit loss across multiple sites because a single natural catastrophe event becomes a more realistic concern.”

On the impact of new insurance providers in the market, he says: “While we expect to see an increase in competitive tension locally with experience in renewable energy growing, for the foreseeable future we anticipate corrective action to continue as the market further responds to, and understands, the losses sustained.”

WTW’s report says that globally, this year has been characterised by natural catastrophe concerns, supply chain instability, technology maturity, rapidly growing energy storage and globalisation of technologies.

The report says the insurance market is conscious that €1 billion-plus ($1.66 billion) losses from a single natural disaster are becoming more common, and renewal discussions are focused on escalating catastrophe losses.

Climate events such as El Nino and La Nina also influence insurers’ risk assessments on renewable energy clients, including in Australia, according to WTW.

“Solar energy can also be influenced by the tropical Pacific, even in places of solar abundance. During the austral winter, La Nina usually brings rainy weather with heavy clouds to the eastern and northeastern part of Australia, which serves to decrease solar radiation.

“On the other hand, El Nino should be good news for energy production because it raises solar exposure across much of Queensland, NSW and the Northern Territory.

“But because El Nino usually makes summer in Australia hotter and drier, the solar industry could still face undesirable consequences should heatwaves increase demand for electricity or lead to facilities producing power less efficiently.”