Risk revealed by Lloyd's

Clean technologies and hard-to-abate sectors

With 90% of the global economy committed to decarbonisation towards net zero, we are witnessing an unprecedented economic and societal transformation of the energy sector.

This report, produced by Lloyd’s Futureset and Aon explores the technologies shifting the energy landscape, reveals the current insurance offerings of each and analyses how demand is likely to evolve over time across the five technologies: carbon markets, carbon capture and storage, low carbon buildings, battery energy storage solutions and geothermal energy. It also considers the same implications for three hard to abate sector: agribusiness, shipping, and aviation.

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Carbon markets

Carbon offsets are one of the most effective ways to reduce the impact of emissions for industries that are particularly difficult to de-carbonise – currently natured based solutions (NBS) projects form the basis of most carbon offsets.

Carbon offset projects require both standard and specialist insurance products, each explored in our analysis.

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Carbon capture, utilisation, and storage (CCUS)

CCUS refers to a suite of technologies that enable mitigation of CO2 emissions from large point sources such as power plants, refineries, and other industrial facilities.

The technology is gaining momentum globally, with up to 200 projects planned by 2030, many of which will require both standard and specialist insurance products.

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Low-carbon buildings

Buildings account for a large proportion of global energy consumption and GHG emissions, making retrofits and green property coverage critical components of the net zero transition.

As global policies mature in line with transition pathways, investment in retrofits will follow, presenting a material opportunity for the insurance industry to support clients.

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Batteries and grid

Battery energy storage systems (BESS) are expected to play a pivotal role in reducing dependency on high carbon energy generation, accelerating the growth of renewables.

Insurers have developed standalone products for energy storage or integrated them into existing power policies, but BESS operators will seek increased capacity as more projects commence.

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Geothermal energy

Geothermal energy is generally thought to be limited to regions sitting on tectonic plate boundaries, but growth in ground-sourced heat pumps has demonstrated wider opportunities.

Products already exist to support geothermal projects, and the insurance industry is well placed to enable the transition of assets through retrofitting as the technology becomes proven.

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Hard-to-abate sectors

In part due to appetite, transition risks and a lack of viable abatement options, hard-to-abate sectors such as agri-business (agriculture and forestry) and marine and aviation are transitioning at a slower pace. This can also affect the supply of insurance due to a lack of insight and data on any potential new risks.

In this section of the report we explore ways in which the insurance industry can form partnerships and encourage behaviour change in sectors.

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Risk revealed event series

Risk revealed by Lloyd’s is the latest events series from Lloyd’s Futureset set up to increase awareness, help educate and connect the Lloyd’s market with pioneering, innovative firms in the clean energy space and to facilitate the difficult, but important questions around green technology innovation and risk mitigation.

See all events in the series.

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