Focus: Partner reports on Financing resilient energy infrastructure

In 2016, the World Energy Council (WEC, www.worldenergy.org), Swiss Re Corporate Solutions and Marsh & McLennan Companies (www.mmc.com) presented the findings of their report “The road to resilience: financing resilient energy infrastructure”, ahead of the World Energy Congress. The publication summarises three comprehensive studies focusing on key risks the global energy sector needs to manage: extreme weather, energy-water-food dependencies and cyber crime.

Modern energy infrastructures are highly vulnerable to cyber attacks. Three recent reports we produced together with partners look at the key risks that need to be addressed to make energy infrastructure more resilient.

These risks impact both the physical structures and the capital returns needed to reach a more sustainable energy future.

Extreme weather

Events such as hurricanes, storm surges, heat waves and ice storms are growing in frequency and severity. Hurricane Sandy or Typhoon Haiyan for example illustrated that energy infrastructure is often entirely inadequate to handle disruptions of such magnitude. In general, insured losses from severe convective storms have increased by more than 40% over the last 20 years.

Food-water-energy nexus

98% of the world’s power supply depends on water. Food production, in turn, requires both water and energy. In other words, the food-water-energy nexus can significantly impact energy supplies.

Cyber attacks

Finally, the energy sector is highly vulnerable to cyber attacks. As Ukraine experienced recently, an attack on a power grid can cut off a whole country’s power.

Modern energy infrastructures are evolving into complex systems with many interdependent parts, and disruptions to any of these can have truly dramatic consequences. The summary report offers seven recommended action items for governments, business leaders and the finance sector to improve the financing of resilient energy infrastructure.

The role of insurance

Throughout the report, the authors emphasise the role of insurance in achieving resilience. The insurance industry is already helping energy companies cope with the risks identified in the studies. Pioneering insurance transactions illustrate that protection against unfavourable weather is available for wind, solar and hydroelectric facilities. Advanced cyber solutions combine comprehensive insurance protection with risk mitigation and remediation services.

On our website you can learn more about the reports and their recommendations.