Sharing risk to create a renewable future
A story by Olly Litterick, Chaucer
Olly Litterick has spent his career in the Lloyd’s market, first for a decade as a broker and now as an underwriter at Chaucer where he manages their Renewable Energy account.
“Renewables are at the forefront of technology evolution, and (re)insurance helps the sector to innovate and grow, that’s how we help the world move forward” – Olly Litterick, Chaucer.
Olly’s team helps to insure and reinsure some of the world’s largest and boldest renewable energy projects – from on and offshore wind, solar and hydroelectric farms to geothermal, biomass, biodiesel and anaerobic digestion plants – providing the complete project-specific coverage that financial investors in the renewables sector insist upon.
“If you want to build a $250m wind farm in Latin America for example, in the event of an insurable loss the investors or lenders involved want to be sure that the project owner is able to repay the debt. They expect the project owner to purchase insurance with financially secure institutions, which is exactly what we provide in the Lloyd’s market.”
As demand for renewables continues to grow – driven in large part by the increasingly ambitious sustainability targets of governments - so too do the opportunities for the (re)insurance industry.
“There are great opportunities in the Lloyd’s market for Renewable Energy business. As these projects become larger, the market becomes even more subscription-based. As risks become too big for individual (re)insurers, Syndicates think about how best to manage aggregate exposures and their spread of risk”. Of course, when it comes to sharing risk, it is about more than the pooling of capital, especially in such a new market where the learning curve can be steep.
“We do not have many years of loss history and learning from events, as is the case with the traditional marine market. We only have a 20-year history, and the technology has developed tremendously during this time, which makes it more challenging to underwrite and price the exposures effectively.”
“The nature of insurance is that the market learns by paying claims, that is one of the main ways that the sector gains insight and grows expertise,” says Olly. “We are constantly analysing the loss data we incur to gain a better understanding of how the various renewable technologies that we work with are impacted by the diverse perils that they face”.
Through the work of the Lloyd’s Market Association, and with research and insights from the Lloyd’s Corporation, the sharing of knowledge across the market ultimately creates and delivers better products for policyholders. The renewable energy (re)insurance market at Lloyd’s has “without doubt allowed us to gain a better understanding together as Syndicates and to transact more business.”
Olly believes a ‘braver world’ is one that embraces the opportunities and challenges associated with the global shift toward alternative, sustainable sources of energy. That includes enabling the companies behind the world’s renewables projects to invest in new technologies, and often presenting complex new risk considerations in the process. This approach is further endorsed by the new Lloyd’s Environmental, Social and Governance Policy, which is committed to contributing to a more sustainable future for our market, our customers and for society.
“Renewables are at the forefront of technology evolution,” says Olly. “And (re)insurance helps the sector to innovate and grow, that’s how we help the world move forward”.