- Renewable energy insurance premiums have increased by 20% to 40% due to rising claims from natural disasters.
- New players enter the renewable energy insurance market as insurers seek to support the energy transition.
- Larger infrastructure, such as taller wind turbines, faces higher risks from severe weather, driving further losses.
Renewable energy policyholders face steep insurance premium hikes of 20% to 40% compared to last year as insurers work to recover from costly claims caused by natural disasters.
Unpredictable weather, worsened by climate change, exposes flaws in current risk models. Hailstones and lightning strikes have resulted in much higher losses for insurers than expected. Climate experts warn that global warming will continue driving more severe weather—a vital issue at next week’s COP29 climate talks in Baku.
“Insurers have learned some tough lessons in the past few years, with devastating claims,” said Alex Nelson, class underwriter at Lloyd’s insurer Chaucer.
Insurers raise prices and find ways to improve their environmental, social, and governance (ESG) profiles. They showcase their role in supporting the energy transition by offering renewable energy coverage. “They can back the energy sector by showing their commitment to the transition,” said Tom Sexton, head of renewables and energy at McGill and Partners.
Some insurers have pulled out of catastrophe-hit areas, but others are expanding their renewable energy portfolios. Recent entrants include global property insurer FM, Fidelis unit Novagen, and energy insurer Volt Underwriting. Lloyd’s insurer Beazley also started underwriting renewable energy this year alongside Allianz, Hiscox, and Zurich, which reported growth in this market.
The International Underwriting Association reported a 43% rise in renewable energy premium income among UK commercial insurers in 2023, reaching £532 million ($690.7 million). Lloyd’s of London also noted growth in its renewable energy sector.
However, risks continue to mount. The increasing size of renewable energy infrastructure, like taller offshore wind turbines with longer blades, raises their vulnerability to lightning strikes. In July, debris from a broken wind turbine washed ashore on Nantucket Island, prompting beach closures.
Steven Munday, energy leader at Willis Towers Watson, highlighted that manufacturers risk compromising quality in some renewable energy projects in their race for more extensive and cheaper products.
Hurricanes Helene and Milton struck Florida in September and October, bringing catastrophic losses to onshore renewable energy installations. Zurich estimates its losses from these storms could hit $360 million.
According to the Swiss Re Institute, last year’s giant hailstones in northern Italy caused significant damage to solar panels, especially on older rooftops, resulting in substantial insurance losses.
As climate-related risks rise, the renewable energy insurance market remains volatile. Insurers must balance increasing claims and the need to continue supporting the growing renewable energy sector.
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