Supporting the green energy transition through a thriving re/insurance market

Ahead of conference season, we sat down with Anne Lohbeck, Chief Underwriting Officer Specialty at Swiss Re P&C Re, to hear about the fast developing re/insurance market for renewable energy.

Anne Lohbeck (AL): If you want to see how quickly this space is moving, just look at the news from the first half of this year. From grid infrastructure to new insurance offerings, we see increasing client appetite to enter and manage risks in this space. We are developing new products and helping clients manage volatility via facultative and treaty reinsurance solutions.

So, let's take a step back and consider what's brought us to this pivotal moment in the green energy transition. It's driven by two factors.

First are the energy security needs of different markets. The war in Ukraine highlighted the need for countries to accelerate energy transition programmes to reduce reliance on Russian gas and shore up domestic energy security, especially in Europe. Secondly, we, as a society, need to address the long-term challenge of climate change and introduce clean sources of energy.

These changes have brought to light the complex risk landscape that sits beneath renewable energy.

Energy infrastructure has had to adapt both to new supply realities as well as drive investment in essential commodities required to create renewable technology.

This applies across the energy supply chain – from investment in project construction, to geopolitical shifts impacting the supply of rare earth minerals as well as the grid infrastructure that connects projects to electricity supplies and the storage technologies that are essential to make renewable energy supply reliable.

AL: This conference season, we think questions surrounding how clients can be supported with this emerging risk landscape are going to be a big topic, especially across property, energy, marine and engineering lines of business.  

We know that there are several areas to keep developing – the more we understand these risks, the more manageable they become:

• Ensuring the flow of talent into these specialised risk areas – we need to ensure underwriters have the right tools and knowledge to apply their expertise to new types of risk.
• Advancing insurance risk management – understanding what best practices looks like so that the insurance industry can consider such practices when managing and mitigating risks associated with projects throughout the lifecycle, from construction to operations and decommissioning.
• Continuous updating and sharing of data and knowledge – ensuring we have the right data, modelling, and risk knowledge is key to informing conversations around wordings, pricing and risk management with clients. For example, novel technologies introduce new risks, such as environmental impacts associated with waste generation during the manufacture, operation and end-of-life of wind turbines. Here we need more data to better understand potential environmental impacts and exposures throughout the lifecycle. Another case in point are NatCat models, which although advanced in areas where there are properties to insure, aren't so much in areas typically used to build renewable projects, such as offshore wind farms for example. Here we need to advance our modelling capabilities to be able to better manage NatCat events and accumulation risks, especially given the high values involved. And finally, new energy and fuel sources like hydrogen are also garnering greater attention. Identified as a means to replace conventional fuels to heat homes and power transportation networks, hydrogen is an exciting category of the green energy transition. However, it is one which needs a fuller understanding of the risks involved, and thus how insurers can help with risk transfer and additional services.

Learning with our clients and sharing with them the global perspectives that we have access to will be vital to progress. That's why we formed our Centre of Competence for Renewable Energy this year – to develop risk knowledge and build expertise in new fields that our clients can leverage. Our centre also allows clients to efficiently arrange capacity through our different and wide-ranging lines of business.

AL: We have a key role to play in managing and mitigating the risks associated with renewable energy projects and advancing decarbonisation.

What is needed is an innovative approach to risk management and product development. This will help unlock capital, give further momentum to the green transition, and ensure the renewable energy sector is well protected in the future.

If we get this right, there is a huge opportunity ahead. According to the Swiss Re Institute, investments in green energy will generate additional energy sector-related insurance premiums of USD 237 billion by 2035.

So, how can we support project developers and investors with risks?

By being at the frontier of knowledge with unique perspectives, we can play a role in encouraging innovation and the uptake of new technologies. By sharing insights to inform new projects, we can help to address the risks and volatility involved and overcome slowed progress caused by talent gaps in renewable markets.

The accelerated push into green energy won't relent. The landscape insurers face is indeed complex. But harnessing our collective risk experience, building and sharing knowledge, and leveraging data analytics and AI, enables us to innovate insurance solutions needed to unblock the path to investing in green energy projects.