According to recent research by AXIS Capital, most energy producers “view the insurance industry as a service provider that protects customers through risk transfer solutions, rather than a strategic partner that can help spark investments and support innovation in the energy transition.” Additionally, according to the same research, 84% of energy producers would increase renewable investments if insurers were involved earlier. This highlights the growing opportunity and demand for insurers to act not just as risk mitigators but as proactive partners in scaling renewable energy.
Where are we currently with the energy transition? Renewables accounted for 30% of global electricity in 2023, while fossil fuels fell to 60%, their lowest share in 50 years according to the International Energy Agency. However, emerging markets face the largest financing gaps, with geopolitical tensions and government policy uncertainties further complicating the situation.
What this means for actuaries:
As we continue to journey to net-zero emission by 2050, insurers and actuaries don’t have to sit on the sidelines. Insurers can play a critical role by participating early in developmental stages and providing comprehensive underwriting for innovative technologies. They can also allocate capital toward emerging clean technologies and renewable energy products.
Based on a recent report by the Geneva Association, larger re/insurers are investing in technologies such as floating turbines and advanced solar modules, many of which lack sufficient pilot testing and thus make historical performance data insufficient. Pricing these risks requires a prototype-driven approach. For new, untested risks associated with prototype projects such as green hydrogen, actuaries must collaborate on research initiatives to better understand and mitigate risks.
Sources:
- https://www.iea.org/reports/world-energy-outlook-2024.
- https://axiscapital.foleon.com/thought-leadership/navigatingrisk/deep-dive-key-finding-5.
- https://www.genevaassociation.org/sites/default/files/2024-01/climate_tech_full_report.pdf.
- https://www.genevaassociation.org/sites/default/files/2024-04/climate_tech_2_report_090424_web_.pdf.
