The rapid expansion of renewable energy sources such as solar, wind, and battery storage is expected to significantly boost reinsurance demand, according to a new report by Howden Re. The report titled “Watt Now? Reinsuring the Renewable Energy Transition” highlights the increasing need for tailored reinsurance solutions to support the renewable energy transition as the world moves toward cleaner energy systems.
Renewable Energy Growth and Its Impact on Reinsurance
Governments worldwide are increasing efforts to promote renewable energy through incentives and policies. As a result, demand for cleaner power systems is accelerating. The Howden Re report projects that by 2030, renewable energy will contribute to 74% of the growth in global primary energy consumption. This shift is primarily driven by the decreasing costs of technologies like solar, wind, and battery energy storage systems (BESS), which are becoming more competitive with traditional energy sources.
Renewable energy growth presents opportunities and challenges for the re/insurance sector. The report notes that critical areas such as solar power, wind power, and BESS insurance will require specialised reinsurance solutions to address these technologies’ unique risks.
Collaboration and Risk Management in Renewable Energy
Howden Re’s report underscores the importance of collaboration among stakeholders—manufacturers, producers, cedents, and reinsurers—to manage the increasing risks in the renewable energy sector. With the rise in renewable energy projects, effective risk management in renewable energy is critical to ensure sustainable growth and protect investments.
James Metcalf, associate director of marine, energy, and terror at Howden Re, emphasized the challenges and opportunities in the fast-evolving renewable energy market. He stressed that collaboration is essential to maintain the resilience of renewable energy projects as they scale globally.
Simon Brooks, managing director at Howden Re, highlighted the complex natural perils and rapidly evolving technologies facing the sector. He pointed out that severe convective storms (SCS) now account for 36% of global insured natural catastrophe losses, illustrating the growing need for comprehensive risk strategies to support renewable energy projects.
Tailored Reinsurance Solutions for a Growing Market
As the renewable energy sector expands, Howden Re calls on reinsurers to refine their approach to risk management and provide more tailored solutions. The report emphasizes that reinsurance for renewable energy must account for the specific challenges, characteristics, and construction needs of different renewable technologies, including solar, wind, and battery energy storage systems.
Reinsurers are encouraged to work closely with cedents to clearly articulate exposures and consider factors such as construction timelines, asset design, and environmental conditions. This allows for more accurate risk assessments and customized reinsurance solutions to meet the growing demand in the sector.
Reinsurance Industry Trends in Renewable Energy
The report highlights that the renewable energy insurance market is experiencing steady growth, driven by increasing global adoption of clean energy technologies. There is significant premium potential across the solar, wind, and BESS sectors as the global energy landscape shifts toward renewable sources.
Howden Re’s findings suggest that the reinsurance industry will play a crucial role in mitigating risks and supporting the expansion of renewable energy infrastructure. Reinsurers will help drive the sustainability and growth of the renewable energy sector by offering insurance for solar power, wind power, and battery energy storage.
Future Role of Reinsurance in the Renewable Energy Transition
The Howden Re report makes it clear that the re/insurance industry is pivotal to the renewable energy transition. As the world shifts toward a cleaner energy future, reinsurers must adapt to the emerging needs of the sector by providing innovative, customized risk management solutions.
By addressing the renewable energy sector risks tied to technologies such as onshore and offshore wind, solar, and BESS, the re/insurance industry will support the continued expansion of renewable energy projects globally. This includes refining underwriting approaches, improving transparency, and fostering greater collaboration among stakeholders.
The global push toward achieving climate goals and the evolving energy landscape requires the re/insurance industry to be agile and proactive. With renewable energy set to dominate the global energy market in the coming years, the role of reinsurers in managing the risks and ensuring the resilience of renewable projects will be essential.
Key Statistics from the Report
- By 2030, renewable energy will account for 74% of the growth in global primary energy consumption.
- Severe convective storms (SCS) now represent 36% of global insured natural catastrophe losses, underscoring the need for comprehensive risk strategies in renewable energy.
- Significant premium growth is expected in sectors such as solar, wind, and battery storage, offering opportunities for reinsurance industry trends to evolve with market demands.
Howden Re’s report concludes that reinsurers must rise to the challenge of supporting the renewable energy transition. By addressing the specific risks associated with clean energy technologies, the re/insurance industry can play a central role in shaping the future of energy and helping the world meet its climate goals.
