Sat. Jan 29th, 2022

Willis Towers Watson (WTW), a global insurance brokerage, risk advice and solutions firm, encouraged risk managers to adapt to a shifting risk environment caused by climate change. WTW discusses in its yearly Renewable Energy Market Review the effects of climate change and the resulting shift to renewable and the low-carbon policies, as well as the ever-increasing stresses of Environmental Social Governance (ESG), as primary factors of transition in the risk landscape of the renewable energy industry. The main threats of climate change, such as addressing barriers to scale, increased governmental oversight and future lawsuits, underline the value of risk managers, in particular, as they’re “managing regulatory, technical, and innovation shifts, as well as interpreting what it entails for their business and its investors.”

Renewable Energy Market Review demonstrates how well the energy sector is likely to see more hardening of the insurance business as insurers continue to leverage on last year’s premium hikes to push more price shifts and return profitability of their investments. It found that global markets reported rises of between 10 percent and 40 percent, with more substantial increases in casualty ratings.

Some of the primary issues bombarding the renewable energy insurance industry, according to the study, include aging infrastructure, operations, maintenance, and replacements, natural disaster risk, contractor expertise, lender commitments, the speed of technical change, as well as supply chain disruption risks associated with COVID-19. Graham Knight, who works at the WTW as the head in charge of the global natural resources, said that as COVID-19 affects the global economy as well as insurance requirements harden, the clean energy sector faces uncertainties and threats from both directions. “It is the climate threat and ESG problem, nevertheless, which will have a more critical effect on the future form of the sector,” he added.

He urged green energy firms to build a large ESG footprint and implement climate change’s impact into their potential risk reduction plans to succeed. “Renewable firms require to understand how their sector will be affected by the energy revolution, why the climate change already is changing the risk landscape of their industry, how well they can be able to play a tactical role in shaping their approach to this transformation, and what potential ESG pressures will affect the sector,” Knight stated.

Willis Towers Watson says that environmental, social governance (ESG) and climate change will change the energy sector’s risk landscape in its yearly Energy Market Review report. Willis Towers Watson stated the latest oil price war, as well as the decline in hydrocarbon market as a consequence of the COVID-19 epidemic, will both have a direct effect on future risk control plans for the energy sector. The study found that reaching a sufficient ESG ranking would be crucial in securing and retaining core stakeholders’ interest from energy firms.

By Adam