Extreme weather events are continuing to increase rapidly in frequency and severity, resulting in significant losses in the renewables industry, according to insurer GCube.
GCube’s latest report, Hail or High Water, found that over 70% of solar losses in the last 10 years have occurred since 2017.
Across both wind and solar, the average natural catastrophe (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 wind storms and hail storms, with the largest single solar loss in history resulting from a hailstorm in 2019, GCube said.
These losses have exposed the weaknesses of a “soft” insurance market, particularly in the US.
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, stated GCube.
GCube CEO Fraser McLachlan said: “No market can continually operate at a loss, and renewables insurance is no exception.
“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, and the benchmark needs to be reset across the industry to ensure that projects can continue to be covered.
“As we have just seen in Texas, unmodelled Extreme Weather events can have a significant impact on the grid, and this is only one of many challenges currently threatening the renewables sector.”
He said lessons “need to be learned” from the sector’s management of climate risks to ensure greater resilience to emerging threats like cyber-attacks and the impacts of Covid-19.
“GCube has proved that a sustainable renewable energy insurance market is possible under the right conditions, and we have been able to continue providing A-rated insurance products to ensure that our clients have the cover they need to protect their investments,” added McLachlan.