Welcome to our Power Market Review for 2020 – and to a world that has seemingly been turned upside down. As I write, the full impact of COVID-19 is now being felt across the entire globe and all our thoughts are with our readers and their families as we collectively come to terms with the full magnitude of what is upon us. I can advise that Willis Towers Watson has a special page on our website devoted to COVID-191 and I would advise any of our readers to visit the site to find out all you need to know about our company’s position as the weeks and months progress. As this review went to press, there is no doubt that the issue of COVID-19 remained uppermost in all our minds as the power industry and their stakeholders – shareholders, lenders, insurers, brokers and others – begin to analyse the effects on their balance sheets and on their overall risk landscape. So this year, our leading article summarises the impact to date on both the power sector and its respective insurance markets. This is clearly an ongoing situation that will be with us for the foreseeable future so we will continue to keep our readers up to date with the latest developments as the rest of 2020 unfolds. However, there is another fundamental issue that will outlive the current pandemic, and that is the issue of climate change and Environmental Social Governance (ESG), which has also had a major role to play in transforming the power industry risk landscape. Regardless of individual views on the subject of climate change, the risks to your organisation that it brings could not be more significant, both now and in the future. Indeed, aside from COVID-19, ESG is rapidly becoming the single most important business driver of the decade, not just for the power industry but for business and commerce in general. Only last month the Financial Times (FT) was reporting that “companies that consider environmental and social factors — and abide by good standards of corporate governance — should be better equipped to ride out a downturn and quickly get back up to speed”. In the same article, the FT also commented that “investors are also still going all in on environmental, social and governance themes — and so far their bets have paid off. If anything, the pandemic has only reinforced fund managers’ belief that ESG is worth worrying about”2. We have therefore dedicated the second part of the Review to the issue of ESG and the risk management implications for the power industry. Margaret-Ann Splawn, who is a climate policy finance and investment consultant, sets the scene with a detailed analysis of how ESG is impacting the power industry, while our experts from the Willis Research Network then show how power industry risk managers have a vital strategic role to play in quantifying climate change risk, as well as improving their company’s ESG footprint. Meanwhile the power industry continues to reel from the effects of the global insurance market’s “retreat from coal”, with insurance capacity in scarce supply as the global insurance market continues to harden significantly for Power risks. Willis Towers Watson’s Carlos Wilkinson, our GB Head of Power, provides an in-depth analysis of how this trend is affecting the supply of insurance market capacity to the industry. Part three of our Review focuses on a variety of risk management issues, including the vital role that analytics can play in determining optimal risk management strategies in a hardening market, as well as articles on managing your geopolitical and cyber risks. We also take a look at the risks emerging from digitisation in the industry and offer a fresh insight as to the value of enhanced Claims Protocols. Finally, it won’t come as any great surprise to most readers that the Power insurance markets have continued to harden significantly in 2020 and there is no denying that the last 12 months have been challenging ones for the power industry and their brokers. The underlying market dynamics which have led to today’s hardening market conditions were outlined in some detail in last year’s Review – a general centralisation of underwriting authority, a determination by senior insurer management to generate change, significant loss levels – have simply accentuated during the last 12 months. So in part four of the Review we describe major Property and Liability insurance market developments in both London and North America and provide a round-up of regional developments from our Power specialists in Beijing, Dubai, Latin America and Singapore. The one common denominator for buyers is simple: the hard market has truly arrived; the placing process will take longer than you might be used to; so be prepared and work with us to derive optimal results for your organisation. We hope you enjoy reading the Review, and as ever would welcome any feedback that you may have.
Graham Knight is Head of Global Natural Resources, Willis Towers Watson. graham.knight@willistowerswatson.com
1 https://www.willistowerswatson.com/ en-GB/Insights/trending-topics/willis-towers-watson-response-to-covid-19 2 “Coronavirus is strengthening the hand of ESG investors” - Billy Nauman, FT website, May 15 2020
