Extreme weather events that fall outside of traditionally modeled natural catastrophe (Nat Cat) definitions – including hailstorms, wildfires and extreme cold – are continuing to increase rapidly in frequency and severity, resulting in significant losses in the renewable energy sector.
According to a new report from GCube Insurance Services (GCube), an insurer for renewable energy projects, over 70% of solar losses in the last 10 years have occurred since 2017. Across both wind and solar, the average Nat Cat or extreme weather-related loss in the latter half of the decade was over 300% higher than before 2015.
Whilst solar projects have most frequently been damaged by wildfire, compared to flooding for wind projects, both technologies have also seen substantial claims from windstorms and hailstorms, with the largest single solar loss in history resulting from a hailstorm in 2019.
These losses have exposed the weaknesses of a ‘soft’ insurance market, particularly in the U.S. Recent entrants to the market offering low deductibles, low premiums and broad terms to gain market share have faced considerable losses, forcing a number of insurers to exit the space over the last decade. However, current market conditions are now starting to drive a long overdue reset in pricing as insurers seek to ensure ongoing sustainability.
“No market can continually operate at a loss – renewables insurance is no exception,” says Fraser McLachlan, CEO of GCube. “As the renewables risk landscape has changed, GCube has been one of the first to alter its terms and conditions to help maintain the sustainability of the sector. The benchmark needs to be reset across the industry to ensure that projects can continue to be covered.”
GCube explores these themes further in its recently released Hail or High Water report. The report analyses Nat Cat and extreme weather claims data from across the industry over the past decade and provides recommendations for mitigating these losses.
To request a copy of GCube’s Hail or High Water report, click here.
