Extreme Weather events that fall outside of traditionally modelled Natural Catastrophe (Nat Cat) definitions, including hailstorms, wildfires and extreme cold, are continuing to increase rapidly in frequency and severity, resulting in significant losses in the renewable energy sector.
According to a new report from GCube Insurance Services (GCube), the leading insurer for renewable energy projects, over 70% of solar losses in the last ten years have occurred since 2017. Across both wind and solar, the average Nat Cat or Extreme Weather-related loss in the latter half of the decade was over 300% higher than before 2015.
Whilst solar projects have most frequently been damaged by wildfire, compared to flooding for wind projects, both technologies have also seen substantial claims from windstorms and hailstorms, with the largest single solar loss in history resulting from a hailstorm in 2019.
These losses have exposed the weaknesses of a ‘soft’ insurance market, particularly in the US. Recent entrants to the market offering low deductibles, low premiums and broad terms to gain market share have faced considerable losses, forcing a number of insurers to exit the space over the last decade. However, current market conditions are now starting to drive a long overdue ‘reset’ in pricing as insurers seek to ensure ongoing sustainability.
Fraser McLachlan, CEO of GCube, said: “No market can continually operate at a loss, and renewables insurance is no exception. As the renewables risk landscape has changed, GCube has been one of the first to alter its terms and conditions to help maintain the sustainability of the sector, and the benchmark needs to be reset across the industry to ensure that projects can continue to be covered.
“As we have just seen in Texas, unmodelled Extreme Weather events can have a significant impact on the grid, and this is only one of many challenges currently threatening the renewables sector.”
He continued: “Lessons need to be learned from the sector’s management of climate risks to ensure greater resilience to emerging threats like cyber-attacks and the impacts of Covid-19. GCube has proved that a sustainable renewable energy insurance market is possible under the right conditions, and we have been able to continue providing A-rated insurance products to ensure that our clients have the cover they need to protect their investments.”
GCube explores these themes further in its ‘Hail or High Water’ report, released today to its clients. The report analyses Nat Cat and Extreme Weather claims data from across the industry over the past decade and provides recommendations for mitigating these losses. To request a copy of the report, please visit: http://www.gcube-insurance.com/reports/hail-or-high-water/