Companies in the conventional power and renewable energy sectors should be preparing themselves to contend with disruption to their businesses from a range of sources...
...including potentially adverse developments in the insurance market, according to the latest Power and Renewable Energy Market Review from Willis Towers Watson.
Key risk findings in the Review include:
- The reality of climate change, which is influencing not only the composition of countries’ energy mix, but also the underwriting positions of large parts of the insurance market, as the major European carriers pull back from the coal-fired generation sector for environmental reasons;
- Independent and smaller coal operators who lack a diversified portfolio may be the most seriously affected by the consequent withdrawal of market capacity;
- More generally, the Lloyd’s ‘Decile 10’ initiative is setting the tone for a more rigorous global insurance market environment in 2019;
- The development of innovations in power generation, such as larger wind turbines with increased output, could be frustrated by insurers’ unwillingness to embrace the risks associated with unproven generation technologies;
- Renewable energy developers face geopolitical concerns, with national governments having the power to change favourable regulatory regimes - for example, by cutting renewables incentives, thereby impacting the developers’ pre-agreed investment;
- Ever-mutating cyber risks present not only direct threats to companies’ own operations but also put their supply chain and customer accessibility in jeopardy.
Graham Knight, Head of Natural Resources GB at Willis Towers Watson, commented:
“The risks facing the power and renewables sector are wide-ranging and ever-changing. As the effects of climate change and geopolitical risk continue to create uncertainty and remain at the top of boardroom agendas, the rapid innovations in technology present both threats and opportunities. It is incumbent on the insurance industry to embrace the risks presented by these new developments and provide the appropriate risk advisory and risk transfer / retention solution. It is essential that today’s power and renewable organisations prepare themselves for the turbulence that disruptive change inevitably brings. Our Market Review helps them plan to do just that.”
A link to the report can be found here
