General Insurance Article - Move to renewable energy is driving the change in industry

As the sector expands, risk managers must respond to an evolving risk landscape prompted by climate change - the key theme of Willis Towers Watson’s annual Renewable Energy Market Review

 Climate change and the subsequent transition to renewable energy and low-carbon initiatives, as well as the growing significance of Environmental Social Governance (ESG) pressures, will transform the renewable energy industry risk landscape, according to Willis Towers Watson at the launch of its annual Renewable Energy Market Review.

 The escalating impact of climate change and ESG factors form a key theme of the report. Key challenges brought on by climate change, including overcoming barriers to scale, regulatory scrutiny and potential future litigation, require that risk managers need to meet these challenges head on. Indeed, their role will increase in importance as they navigate changes in regulation, technology and innovation, as well as translating what this means for their company and its investors. Meanwhile, demonstrating improved ESG performance will help reduce cost of capital and enhance partnerships within industries and communities. These increasing pressures are also creating growth in the renewable energy sector as companies look to transition to a low-carbon environment.

 At the same time, the renewables industry is faced with further insurance market hardening as insurers seek to capitalize on last year’s pricing increases to drive further improvements in pricing to restore this portfolio to profitability. Increases of between 10 and 40% are being experienced across a range of global markets, while Casualty rating increases can sometimes be even more significant. Some of the key challenges besetting the renewables insurance market include aged assets, operation, maintenance and spares, natural catastrophe risk, contractor experience, lender obligations, the pace of technological change and COVID-19 related supply chain interruption risks.

 Graham Knight, Head of Global Natural Resources, Willis Towers Watson, said: “In these unprecedented times, the renewables industry finds itself beset by risks and challenges from all sides, as COVID-19 tightens its stranglehold on the global economy and insurance market conditions harden. However, it is the issue of climate risk and ESG that will have a more significant impact on the future shape of the industry. Renewables companies must develop a significant ESG footprint and incorporate climate change risk into their risk mitigation strategies in order to survive in the future.”

 He added: “Renewables companies need to know how the energy transition is going to affect their industry, why climate change is already transforming their industry risk landscape, how they can play a strategic role in developing their response to this transition and which ESG pressures are going to affect the industry in the future. At Willis Tower Watson, we are helping renewables companies navigate this complex risk terrain and manage the transition to provide innovative solutions and foster growth in this increasingly important sector.”

 A full copy of the report can be found here

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