Can renewable energy growth continue amidst rising insurance risks?

Alternative energy assets often lack the quality needed for long-term sustainability.

The renewable energy sector, though still a small part of overall energy assets, has seen significant growth due to improved supply chains, lower costs for clean technologies, and increasing pressure for the energy transition, Gallagher Re executives Keith Lippman, Steve Bowen, and Richard Rudden discussed. 

Despite these advancements, the sector faces challenges, including damage from extreme weather events like hailstorms and hurricanes, and inconsistencies in installation standards, particularly in solar energy projects. 

Bowen noted that whilst newer solar panel structures have shown resilience in recent storms, older installations continue to face higher risks.

Carriers are increasingly insuring renewable energy assets, though profitability remains a concern. 

According to Lippman, alternative energy assets often lack the quality needed for long-term sustainability, partly due to rushed and low-cost construction. Insurers are finding it challenging to underwrite renewable energy projects due to the diverse risks associated with different types of energy sources, from solar panels to hydroelectric plants.

Bowen emphasised the need for more precise risk assessment and tailored underwriting, whilst Rudden highlighted the importance of cooperation between insurers, manufacturers, and asset operators. 

He stressed that failing to manage these risks effectively could erode confidence in the renewable energy market, which is critical for its continued growth.

Gallagher Re is helping clients navigate this evolving landscape by offering expertise in renewable energy risks and encouraging collaboration with engineers and manufacturers to better understand the complexities of the market. 

The demand for standalone renewable energy contracts is rising as firms aim to meet ESG targets and improve transparency in their portfolios.

Looking ahead, the insurance industry faces the challenge of staying at the forefront of technological advancements in renewable energy. 

Bowen noted that the shift toward cleaner energy sources is accelerating, and the industry must adapt by developing new insurance products to cover emerging risks, including those related to carbon credits and offsets. 

Lippman compared the current situation to the early days of cyber insurance, suggesting that the renewable energy market will require similar innovation to create a sustainable, profitable insurance environment.