Insurer Claims US Renewables Suffered Worst Summer of Losses

GCube insurance, a leading underwriter for renewable energy projects has highlighted the financial impacts of Extreme Weather and Natural Catastrophe events that are outpacing the development of mitigation strategies in the North American renewables market. That might mean that insurance premiums will also keep pace with the overall rise in costs the industry, particularly solar has seen since 2021.

In its North American Nat Cat Update, GCube – a member of the Tokio Marine HCC group of companies with US offices in Orange County, New York City, and Houston – reports that market correction hasn’t gone far enough to address the growing severity of Nat Cat and Extreme Weather events. A softening of rates could jeopardise the sustainable growth of US wind and solar faced with these evolving risks.

According to GCube, the US renewables market has just experienced its worst summer on record for Nat Cat claims, with unmodelled Extreme Weather events proving far more prevalent and damaging than traditional Nat Cat. In particular, hail losses experienced this year in Texas are projected to reach $300m – almost ten times the estimated losses from 2020’s Hurricane Hanna. Hail losses would have mostly impacted solar plants, for the record.

While total claims values are still being calculated, multiple instances of losses exceeding sub-limits of up to $50 million, due to Extreme Weather events like hail, tornados, and derechos, make clear the need for improved modeling and the more effective use of existing weather data, according to the insurer. Impact testing of solar has been pointed out as one area in immediate need of remediation.

The supply chain challenge in particular has also been highlighted in the US market, with significant financial implications tied to increased downtime and component costs.

“While the increasing frequency of Extreme Weather and Nat Cat events is not surprising to us, the rising severity of losses, and the industry’s continued difficulty in managing these risks, is a concerning trend,” commented Fraser McLachlan, CEO, GCube. “The unprecedented growth potential unlocked by the Inflation Reduction Act will count for little if the North American renewables sector is unable to combat Extreme weather risks.”

“Concerted effort is needed across the value chain to strengthen policies, improve data utilisation, and update modeling and testing procedures, and support sustainable growth for the sector. Our latest report issues a clear call for collaboration in the US renewables industry to develop measures to combat the fallout of Extreme Weather, and support a stable, successful energy transition.”

While an insurer making a case for higher premiums basis losses is not a surprise, Gcube’s observations do merit attention as these issues exist on the record and the worsening in terms of weather events is well recorded too.