DEEP DIVE
Key Finding #5
There is an opportunity for the insurance industry to take a more proactive and strategic role in the energy transition, moving beyond a transactional mindset towards supporting customers in a more comprehensive way
Insurers have a critical opportunity to shift from being viewed as capacity providers to becoming proactive partners and enablers of the energy transition. However, data reveals that energy producers view the insurance industry primarily as a service provider that protects customers through traditional risk transfer solutions (59% of UK respondents, 52% of US respondents), rather than a strategic partner that can help spark investments and support innovation in the energy transition (42% of UK respondents, 49% of US respondents).
This may reflect a gap in customers’ understanding of insurance’s role in driving the energy transition forward — from de-risking investments to ensuring resilience and protections in the face of climate-related challenges. Furthermore, survey results show that 31% of energy producers who believe the insurance industry currently hurts innovation in the energy transition attribute this to the lack of comprehensive and multiline coverage options. This highlights the need for more holistic insurance solutions that cover multiple lines, rather than fragmenting policies across multiple providers.
By developing deep technological understanding, offering early-stage risk mitigation advice, and providing comprehensive coverage options to customers, insurers can position themselves as indispensable partners who can help energy producers lay the groundwork for a successful energy transition.
The Importance of Expertise
When selecting an insurance provider, energy producers in both the UK and US markets prioritize a provider’s expertise in the technologies being insured, along with their ability to differentiate risk profiles. Based on survey results, several components factor into selecting an insurance provider:
Q: Aside from the cost of premiums, when your company makes decisions on insurance providers for renewable energy or energy transition projects, how important are the following factors in your decision-making?
% Rated Very Important, among Energy Producers in the UK and US:
Insurer demonstrates expertise related to the technologies being insured
Total
Insurer has a deep understanding of your business needs and goals
Total
Insurer provides prompt and reliable claims service
Total
Insurer’s ability to differentiate risk profiles on a project basis
Total
Insurer offers multiline offerings that cover several lines of coverage
Total
The level of insurance mandated by lenders and/or investors
Total
An existing relationship with an insurer
Total
Despite this clear call for enhanced expertise among insurers, there appears to be a potential knowledge gap in today’s market. While 85% of energy producers in the UK and US agree that underwriters currently have a well-rounded understanding of how classes of insurance are interconnected in support of energy transition projects, just 38% strongly agree with this statement.
This discrepancy in alignment with this statement underscores a sense of hesitation in respondents’ confidence regarding the depth of understanding among underwriters. This finding highlights the need for insurers to deepen their understanding of the technologies, risks, and interconnected nature of insurance classes in the energy sector. To address this, 26% of energy producers urge insurers to invest in training programs and resources that enhance their industry understanding of energy transition technologies and associated risks.
According to a US-based customer, to become a more strategic and trusted partner, the insurance industry “needs to explain to customers what it is doing to help its own underwriters understand risk.” This specialized expertise can not only help insurers more effectively tailor their offerings but can also position them as indispensable partners to energy producers navigating the complex landscape of the energy transition.
Becoming a risk partner, not just a capacity provider
Survey data reveals that 93% of energy producers in the UK and US agree that it is essential for insurance companies to proactively provide a variety of risk management services for renewable energy and energy transition technologies. This may involve the insurer’s risk engineer visiting operational assets to identify ways to reduce the risk of breakdown or damage, providing guidance on best practices for safety improvement and technology choices at the design site, or leveraging the insurer’s expertise with the technology being insured to improve the risk landscape via more tailored risk advisory services. Furthermore, among energy producers who believe the insurance industry plays a role in fostering innovation in renewable energy technology, 22% point to risk assessment and management as a specific area where insurers can contribute to further advancements. Effective risk assessment and customer counsel depends on a clear understanding of their priorities, both when it comes to risks and existing project safeguards.
That said, over a quarter of energy producers across both markets (27%) report difficulties receiving early-stage risk mitigation advice from insurers, despite a plurality (42%) keen for insurers to get involved in their projects during the early planning and feasibility stages. This early involvement could help identify, reduce, and quantify risk exposures of technology, as well as help developers make more informed decisions on everything from project design to supply chain choice anchored in an insurer’s ability to assess risk based on historical data.
In fact, the majority of energy producers in the UK (74%) and US (84%) report they would be more likely to invest in a renewable energy or energy transition project if an insurance specialist was involved from day one — well before technology is operational.
“This data is especially encouraging for our industry, and suggests that our stakeholders are looking for insurance providers to serve as proactive risk advisors, not just capacity sources or someone they reach out to after an adverse event takes place.”
Dan Stevens, Head of Renewable Energy Engineering at AXIS
Insurance solutions tailored to customers’ needs
While the ambition to make the energy transition leap is present, navigating the path from vision to reality remains a challenge, and the research shows there are clear areas in which the insurance industry could do more to support customers throughout the transition process. As noted by a US-based broker, “most utilities are grappling with how to quickly transition their asset base to comply with the pressure to move away from fossil fuels.” However, these same energy customers are still seeking comprehensive coverage as they bridge the gap between ambition and reality — and will require insurers to stick with them along the way.
As businesses navigate the hurdles in their transition to cleaner energy sources, most energy producers (84%) seek insurance partners that offer holistic and comprehensive coverage across their entire portfolio, recognizing that the shift towards cleaner energy will be gradual. Rather than fragmenting policies across multiple insurance providers, customers in this space are looking for insurers to underwrite risks across their entire asset portfolio as it evolves. These demands will require insurance providers to become more sophisticated in their ability to provide holistic risk management solutions that can be adapted to customers’ specific asset mix and transition strategies. Brokers note that having “relationships extend across multiple lines with a single underwriter, or a single group of underwriters is very, very attractive to a lot of clients.” Insurers that can provide comprehensive coverage and risk management solutions that further build insurer-customer trust will stand out in helping to drive the energy transition forward.
