Sharing risk to face catastrophes

Renewable energy is a global priority. Geographically and technologically, the industry is advancing in leaps and bounds – as it must, since the health of our planet depends on it.

But the advantages of renewable energy are also its challenges. By relying on the natural world to produce our energy, we are placing our hopes in a climate that is less and less predictable, and which produces a greater number of catastrophic events that can damage and disrupt energy production.

For Rosa Van Reyk, underwriter at GCube, specialist insurers in the sector, catastrophic weather risk is no longer on the horizon. “In 2017 alone, an estimated $337bn in global losses were caused by natural disasters” says Rosa, noting how increased catastrophic weather damages renewable energy infrastructure at considerable expense.

“GCube services over 400 claims annually, and while natural catastrophes made up less than 20% of our onshore wind claims between 2012 and 2018, they accounted for a significantly larger proportion of our claims payments.”

With such high stakes, increasingly unpredictable weather and with location-based catastrophe (Cat) modelling becoming rapidly outdated, Rosa and the team at GCube have worked hard to find new ways of defining natural catastrophes to help with claims.

“Two categories of natural catastrophe events are emerging”, she explains. “‘Hard Cat’, made up of earthquakes, windstorms and other traditional definitions of extreme weather, and ‘Soft Cat’, which include other potentially extreme and unseasonal weather events such as polar vortexes and wildfires.”

These categories help to bring much-needed clarity to the wording of a policy. “For example,” says Rosa, “policies can now state exactly what wind speed, location or time of year constitutes a hurricane rather than an unusual windstorm.” This added clarity allows GCube to assess increasingly complex claims with fairness and consistency, ensuring the confidence and security on which the renewable energy industry can thrive.

Drawing the line between ‘Hard Cat’ and ‘Soft Cat’ events is an important first step, but GCube hasn’t stopped there. Other innovations have followed: more rigorous cataloguing of damage is one, and a huge boost in transparency is another.

When weather damages renewable energy infrastructure, not all damage is visible to the naked eye. External factors such as hailstorms or fire can cause internal damage to solar panels, and production or transportation can cause ‘micro-cracking’, all harming a panel’s efficiency. “A good insurer,” says Rosa, “can insist that panels are examined using X-rays, infra-red cameras or photoluminescence tests, and that those panels are installed and maintained by reputable suppliers.”

Transparency is no less important. “By explaining the loss adjustment process, sharing data and visiting loss sites together,” she adds, “insurers can develop trust and a good rapport with their clients. It can ensure a higher standard of damage cataloguing and avoid long, arduous claims.”

Although the renewable energy landscape is changing, for instance Covid-19 has presented a unique set of challenges for the supply chain of key infrastructure, there are few other industries on which humanity has placed such hope. With that in mind, the timely innovations from GCube and the sector’s other specialist insurers - clearer categorisation, better damage cataloguing and more transparency throughout the claims process - can help an essential industry achieve long-term stability.

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