What did 2020 teach us about underwriting in a new era for power generation
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Authored by Liberty Specialty Markets Onshore Energy Power & Construction Underwriting Manager for London Tom Clifton
Despite the unprecedented impact of the pandemic in 2020, revitalised climate change initiatives and the digitalisation of the economy has continued to create huge demand for clean energy and connectivity alike. The power and energy sectors are redirecting capital into both established and ground-breaking renewable energy technology and infrastructure. 2020 also saw the emergence and uptake of digital technologies that enhance the way we communicate and do business, heralding new potential for insurers to engage with clients.
New risks: Climate change, sustainability and stranded assets
2020 saw a renewed purpose from governments and corporations re-committing to ambitious targets for reducing carbon emissions and increasing Renewable Energy investment. Traditional utilities, asset managers and energy majors, navigating the transition to clean technologies will rely on insurers to support their growth plans and minimise exposure to new technologies, riskier projects, stranded assets and the impacts of climate change. Insurers in turn should develop their own approach to sustainability and climate risk assessment and thus determine how their insurance portfolios will support the sustainability goals of their stakeholders.
How will power insurers respond to the huge changes in their sector and enhance the way they serve clients in 2021 and beyond?
Engagement & digitalisation
We know building trusted partnerships requires sustained face-to–face interaction, however 2020 saw how virtual communication and digital platforms have enhanced the way insurers can engage with clients by more regular discussion and information exchange. This is absolutely vital for insurers to understand the clients’ business and future needs, such as their investment in new technologies and evaluation of business risks such as climate change.
The industry must encourage clients to move towards digital technologies to interact, share risk insights in real-time and conduct virtual surveys and inspections. Standardisation of information exchange between customers, brokers and insurers can ensure speedy and transparent negotiations. At LSM, we support clients through superior risk engineering, claims expertise and data analytics, resulting in favourable outcomes for clients.
Redefine how we serve clients
The way we think of conventional power and energy companies is changing and understanding their future needs is critical. More than ever insurance will be necessary to support the strategies of energy companies as they transform their businesses through reskilling and investing in new capabilities. Traditional power companies investing in renewable energy will require insurance partners that possess technical expertise, including claims services, in established and new generation types, to provide data driven insights in order to ensure their clients prosper in the long term.
Future proofing with analytics
2020 saw one of the highest number of natural catastrophe events on record. ‘Nat cat’ exposures are becoming extremely complex to model and manage with a range of secondary perils such as hail, ice storms and wildfire becoming more prevalent. As more renewable energy projects are built in non-traditional, harsher environments, they become increasingly vulnerable to extreme weather patterns caused by climate change. Unfortunately, historical models are no longer a predictor of the future and insurers must enhance their ability to model and price such exposures.
As new technology enters the market in large volumes, from wind turbines and battery storage to biofuels and hydrogen technologies, insurers will need to capture performance and claims data to make better risk selection decisions and openly share these key insights with their stakeholders.
With these areas in mind, power insurers should look to establish forward looking partnerships with clients, collaborating to provide mutual benefits and profitable growth as they navigate the energy transition.
Sustainability is a strategic objective for LSM. When we make business decisions we consider the environmental impacts of our underwriting, investing, and operations in support of a transition to a low carbon economy. We are advancing climate resilience and supporting a responsible energy transition, while putting people first – our customers, policyholders, employees, investors, and communities.
About Liberty
Liberty Specialty Markets offers specialty and commercial insurance and reinsurance products across key UK, European, Middle East, US and other international locations.
We provide brokers and insureds with a broad range of products through both the Company and Lloyd’s markets and have over 1,700 staff in approximately 65 offices. Liberty Specialty Markets was established in September 2013 bringing together Liberty’s company, syndicate and reinsurance operations into one combined operation, composed of three business units: Commercial, Specialty, and Reinsurance (Liberty Mutual Re). This integrated approach means brokers and clients can benefit from our global reach and operating efficiencies.
Liberty Specialty Markets is part of global insurer, Liberty Mutual Insurance Group, a diversified global insurer, formed in 1912 and headquartered in Boston, Massachusetts. Liberty Mutual is the 5th largest global insurer based on 2017 gross written premium, with over 50,000 employees in 30 countries and economies around the world. Our purpose is to help people embrace today and confidently pursue tomorrow. The promise we make to our customers throughout the world is to provide protection for the unexpected, delivered with care. We achieve this by offering a full range of personal, commercial, and specialty Property & Casualty insurance coverages. Our customers’ trust has earned us the 68th spot on the Fortune 100 list of largest corporations in the U.S., based on 2017 revenue.