Global new investment in renewable energy grew to USD 358 billion in the first six months of 2023 – a 22% rise compared to the prior-year period [1]. Swiss Re Institute expects growth in this sector to continue, generating an increased need for insurance. In fact, Swiss Re's researchers predict that investments in green energy will lead to additional energy sector-related insurance premiums of USD 237 billion by 2035 [2]. For the insurers and operators supporting this transition, there is a challenging risk landscape to navigate. New technology, complex projects and even the impact of climate change can leave gaps in risk knowledge and underwriting data.

In May 2023, P&C Re created a new Centre of Competence for Renewable Energy to help clients manage their renewable energy portfolios. The Co-Heads at the helm of this project, Miguel Ignacio Senac and Michele Cibrario, collaborated to launch the new Centre. "As wind and solar grow in scale, so does the magnitude of investments and lenders are requesting more protection for projects," Michele explains. "This is where reinsurance can add value – with extensive risk insight, expertise and capacity."

With a background in marine underwriting, Michele served ten years as a risk manager for an integrated energy company. At Swiss Re, he has spent six years as an energy upstream facultative and treaty underwriter.

Meanwhile, Co-Head Miguel has worked as an engineering underwriter with Swiss Re for the past 15 years. “The idea for the Centre originated from a simple brainstorm as we were considering how to best service our clients,” notes Miguel. "Over three years we developed it into a business plan, which we managed to bring to life."

The Centre currently supports clients involved in offshore and onshore wind and solar technologies – giving guidance across lines of business, be it engineering, marine or property. Michele, Miguel and their growing team have regular touch points with Swiss Re's underwriters, claims handlers and risk engineers, forming a collective to deliver new solutions and insurance product offerings.

For an offshore wind project, for example, Swiss Re's marine underwriters share insights into the marine environment and logistics, while engineering underwriters add perspective about the erection and management of turbines. The energy upstream underwriting team and managing marine warranty surveyors, meanwhile, contribute input into complex underwater projects.

"The team can now underwrite the risk of building wind farms in increasingly remote ocean environments, or on typhoon-exposed coastlines," notes Miguel. While offshore wind projects have historically proven a challenge to underwrite due to their complexity, a detailed overview of risks gives clients – and the investors financing the projects – more comprehensive insights.

The Centre also focuses on one of the newer areas of growth in the renewable energy market: battery energy storage systems (BESS). BESS are rechargeable batteries that can store energy from different sources and discharge it when needed. This can be used to balance the electricity grid, provide back-up power and improve grid stability.

As the BESS market matures, with new technologies emerging and costs falling, the scale of BESS installations is growing. While global investments in BESS in 2022 totaled over USD 5 billion, the BESS market is expected to reach almost USD 120 billion by 2030 [3]. "To help clients expand into this space, we developed a comprehensive tool to price BESS facilities in 2023," explains Miguel. “We can even share insights with clients early on in the pre-construction phase."

Solar photovoltaics (solar PV) also represents a growing area of interest for investors. In fact, solar PV demonstrated the largest absolute generation growth of all renewable technologies in 2022. Solar farms hold strong potential to support renewable energy targets. However, many solar panels are susceptible to physical risks – hazards ranging from strong wind to earthquakes and hailstorms. Meanwhile, supply chain challenges can complicate efforts to replace damaged solar panels. Thus, ensuring accurate assessments of the long-term quality and reliability of solar panels is vital for insurers.

The Solar Panel Code of Practice (SPCoP) initiative by Swiss Re and solar PV research institutions is one example of how the industry can support best practice. It sets out guidance on how to manage risks and offer sustainable options for panel warranty insurance, allowing buyers to make more informed purchasing decisions and giving greater certainty to an industry faced with long payback periods.

"By bringing expertise to insurance for solar PV clients, we can help operators and investors with protection for solar photovoltaic farms," explains Michele. "They can concentrate on growing their business while maintaining a more stable cash flow."

Giving certainty to investors

Renewables projects present a number of challenges for investors, including a need for high upfront investment with uncertain returns. New technologies and climate change both add to the risks and unknowns. More severe weather conditions like floods, convective storms and hail events add to the hazards associated with renewables projects.

Swiss Re's work, however, is addressing the fears of investors. "Mitigating risk and identifying climate-related exposures is important for attracting investment into renewable energy projects," notes Michele. "Simply put: de-risking the business of renewables means de-risking the investment into new technologies."

"It’s exciting that we as reinsurers can support the growth of renewable energy," adds Miguel. "By boosting access to financing, helping manage risks and promoting innovation, the sector can give momentum to adding renewable capacity."

[1] Renewable Energy Investment Hits Record-Breaking $358 Billion in 1H 2023 | BloombergNEF (bnef.com).

[2] Maintaining resilience as a new world order takes shape – sigma 05/2022 | Swiss Re.

[3] Enabling renewable energy with battery energy storage systems | McKinsey.