StateUp is currently participating in Lloyd's Lab Cohort 13 (for further information, see the end of this post). As we hit the halfway point, I'm sharing reflections on areas in which insurers and governments must collaborate to play their respective parts in rapidly developing a decarbonised and resilient energy future.
Governments and insurers are both critical to unlocking the scale-up of the technologies—from solar photovoltaics to offshore wind and battery energy storage systems (BESS)—that underpin the $1.2 trillion and growing renewable energy market. They also face a common challenge: new technologies, and their roll-out in diverse locations, bring unseen risks and vulnerabilities, exacerbated by data gaps and lack of historical pattern recognition. Data on oil and gas goes back centuries. Data on photovoltaics does not.
Layered with systemic risks such as geopolitical conflicts and the climate crisis, this compounding mix of underdeveloped data and uncertain conditions complicates risk assessment, and investment and underwriting decision-making. Yet it’s exactly these choices that our energy resilience depends upon.
Faced with this common imperative to support the transition despite the unknowns, there is a need and opportunity for them to work together to confront risks differently, including:
New risk-sharing models. New risks require new ways of working. These are only just being formulated and piloted, and require shared understanding and tools. For example, Munich Re has created in partnership with the African Trade Insurance Agency the African Energy Guarantee Facility (AEFG), aiming to unlock USD $1.4 billion in decarbonised energy investment by together identifying often excluded key political risks, and providing cover for them.
Support for re-skilling. Human error accounts for a substantive share of renewables’ losses during both construction and operation. As renewable projects scale, there's a growing shortage of skilled workers to install, operate and manage these systems. This skills' gap is especially acute in remote, rural areas, where new projects are often placed. Re-skilling local communities could unlock economic opportunity, help achieve buy-in, and reduce the likelihood of costly losses—providing incentive for both governments and insurers to support skills-focused initiatives.
Regulatory engagement. Freer flowing conversation would allow insurers to better understand and quantify near-future risks associated with renewable energy projects, and to transfer their own knowledge to inform regulatory decision-making. Currently, this happens unevenly from one country to another. Enhanced understanding would enable more accurate pricing policies, in many places probably expanding the range of assets deemed insurable. This is all the more important in emerging economies, including India, ASEAN, Latin America, and the Middle East, where energy demands are anticipated to continue growing intensively until 2050.
Unlocking energy resilience—and the projected 3.6 trillion USD-by-2030 market around it (IEA)—is contingent on an ecosystem stretching across sectors that can more readily map and respond to new and unpredictable risk factors relating to the next-wave of critical renewables’ energy.
StateUp is currently participating in Lloyd's Lab Cohort 13. With a lower than 5% acceptance rate for this cohort, the Lab is the key route for Lloyd's of London to funnel innovation into the London market. Stay up-to-date on what we're developing here.
