Welcome to Willis Towers Watson’s inaugural Renewable Energy Market Review. We are going to press at a time of unprecedented change in both the renewable and insurance/risk transfer industries, so this a good time to produce a stand-alone Renewables Review as we move into a new decade. A glance at the news headlines tells us all that we all live under particularly gloomy geopolitical clouds. Conflicts and other international tensions are seemingly threatening every kind of business landscape – not only stand offs such as the US/Iran situation and the issue of North Korea but also serious conflicts between Turkey and Syria, between India and Pakistan. To these we might add the threat to economic and political stability from growing populist movements in Europe, notably in Spain, Italy, France, Germany and Hungary as well as the UK. Then there’s the climate change challenge, as the world watches the bushfire tragedy unfolding in Australia and as climate activism around the world increases. Here in Europe, the commitment to act in the face of the climate change threat is very evident. The EU has already committed to cut CO2 emissions by at least 40% by 20301, while modernising the EU’s economy and delivering on jobs and growth for all European citizens. This will enable the EU to move towards a low-carbon economy and implement its commitments under the Paris Agreement. On this critical issue, Willis Towers Watson is leading the private sector response. Our CEO John Haley was at the UN last September launching the CCRI, the Coalition for Climate Resilience Investment2. This is a public/private partnership motivated by the UN secretary general’s recent call for action on climate change. Our goal is to transform mainstream infrastructure investment across the globe and to drive a permanent shift towards a climate resilient economy. Of course, it’s always possible to try to run and hide from change or bury one’s head in the sand in true ostrich fashion. But in the end, we all know that we must face up to the new realities of change. From a renewable energy industry perspective, what are the new realities that we face today? Firstly, there is the reality of change in the renewable energy industry itself. As the threat of climate change makes itself more apparent with every passing year, the exponential growth of the renewable energy industry has attracted the attention of a range of different stakeholders, from traditional energy players to national governments, from new start-ups to climate change protestors. Indeed, it is now generally accepted that renewables are likely to make up the largest share of total global energy supply by 2050. But increasingly, renewable energy industry growth is the bringing with it new risks and issues which need to be faced. That’s why the first part of this Review focuses on series losses, floating offshore wind, bankability, hybrid renewable energy, CSPs and cyber (as well as geopolitics and climate change) - all issues where risk landscapes are in a constant state of flux.
Secondly, there is the reality of change in the global (re)insurance markets. The long period of soft market conditions, characterised by an excess of (re)insurance capital and an emphasis on meeting premium income targets, has finally come to an end. Instead, faced with deteriorating loss ratios and increasing costs, the Renewable Energy insurance market seems to have come to a tipping point; we are now seeing a real determination across the marketplace to arrest the overall slide in rating levels. What’s more, individual insurers are insisting on their own terms and conditions, making the broker’s job of marrying different underwriting philosophies together increasingly challenging. Part Two of this Review therefore focus on the London, International and USA markets and examines how best insureds can manage their risk and mitigate these challenging market conditions. Thirdly, the industry needs to take note and face up to changes from around the world as both industries become increasingly global. In Part Three of this Review, we are delighted to include contributions from our colleagues from Australia, China, Ireland, Japan, Peru, Singapore South Africa, as well as a recap of our successful renewable energy seminar in Prague last October. Please be in no doubt that we at Willis Towers Watson are fully committed to supporting the global renewable energy as it evolves; we have a global view of the industry and we’re at the cutting edge of the risk issues you face. We hope you enjoy this Review. All skills at our disposal - forensic accounting, risk and analytics, risk engineering, cyber, geopolitical expertise as well as broking and claims - can be brought to together to help the renewables industry as together we face up to recent changes and a less than certain future.
Graham Knight is Head of Global Natural Resources, Willis Towers Watson.
1 https://ec.europa.eu/commission/presscorner/detail/en/STATEMENT_18_4155 2 https://www.iigcc.org/news/launch-of-coalition-for-climate-resilient-investment-ccri/