CHANGING OF THE GUARD

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In recent times, Australia has seen the largest growth in renewable energy projects globally. In some respects, it’s not a surprise. The space and climate have made the country a prime location for renewable projects, although a number of factors – including weather events, topography and geography – mean it’s a sector that creates significant challenges for insurers, underwriters and brokers.

It’s a quickly evolving space too, with technology developing at a proverbial rate of knots, while the move to new facilities and the transition of traditional assets means sound risk management is needed as we transition from traditional energy production to more sustainable methods.

“Existing and emerging clients need our help as they transition to achieve their net zero goals,” says Sara Sampaio Soares, National Manager, Energy & Power Australia, Liberty Specialty Markets.

“We are thinking about the resiliency of our customers in terms of the mitigation of climate risks, the adaptation to those risks, and insurance accessibility.

“This relies upon the importance of sound risk management practices, recapitalisation, and investment in human capital to make sure that both existing and new infrastructure being built is sustainable and reliable.”

The challenges are many – and the profession is constantly working to adapt and evolve.

“The transition to more sustainable fuel sources presents several new challenges for insurers,” says Daniela Zaccone, Principal at Marsh.

“There are new risks to consider, the regulation is evolving, and consequently, there’s an uncertainty in underwriting because of the limited historical data involved and the evolving industry standards.

“To overcome these challenges, insurers are actively working on developing specialised expertise in renewable energy and sustainability – they are investing in research, collaborating with industry stakeholders, and leveraging technology and data analytics to improve risk assessment and underwriting practices.”

Matt Langham - Placement Director, National Power & Utilities Practice Leader at Aon, believes the energy transition is the largest shake-up of business models in a generation – and as a consequence presents a vast array of risks, as well as opportunities.

He says, “It presents an array of physical, financial and people risks, which are wide and varied, and from a physical perspective include the construction of new renewable facilities (in many cases where technology does not have the track record of previous generation sources), and protecting assets against the increasing risk of climate change.”

Langham identifies too that significant people risks are among those that consequently emerge.

“Organisations are needing to retrain employees for jobs of the future and those supporting the transition, be it as operators of wind, solar and battery generation projects through to potential hydrogen export facilities as a fuel that has the potential to revolutionise the energy and transport industries. Financial risks can also arise from obtaining financing to progress ambitious prototypical renewable projects to the intermittency of generation and revenue of renewable energy generation facilities.”

Changing Risk Profiles

While our climate o ers a lot of positives for renewables in Australia, it is important energy clients understand the change in risk profile between traditional energy production and renewable assets, which