Insurance coverage for renewable energy projects is coming under increased strain as natural catastrophe (Nat Cat) and extreme weather risks continue to grow, according to a new report from GCube Insurance.
The report draws on the firm’s global claims data and examines how changing weather patterns are affecting risk transfer and project financing across key markets. It outlined how rising claims and increased weather volatility are prompting insurers to adjust coverage terms and pricing.
“For years, the US has been at the frontline of the renewable energy market’s battle with Nat Cat and extreme weather risk,” said Fraser McLachlan, CEO of GCube Insurance. “But while North America has long been the focal point of these challenges, it is now evident that this has become a global issue.
“Across Europe, the Middle East, and Australia, the renewables sector recognises the increasing climate-driven risks, but, due to modelling and data shortfalls, the full scale and complexity of those risks remain unclear."
In the US, some Nat Cat losses related to hail and wildfire have exceeded US$300 million, contributing to more restrictive coverage conditions, including higher deductibles and reduced limits. These shifts are affecting how risk is managed and transferred, with implications for the cost and availability of insurance.
In Europe, the report highlighted a rise in both the frequency and severity of claims. Renewables assets across the continent experienced record insured losses in 2024, alongside widespread flood damage. This has led some insurers to re-evaluate their exposure and adjust underwriting strategies in certain regions.
The Middle East and North Africa, historically viewed as lower-risk for extreme weather, is also seeing a shift in insurer attitudes. According to the report, exposure is increasing as renewable infrastructure expands, requiring closer attention to project resilience and coverage adequacy.
In Australia, insured losses from extreme weather have so far remained limited, but market expansion into new geographic areas is increasing the risk of exposure to bushfires, cyclones and hail.
Insurance challenges are also affecting the financing of renewable projects. Some developments have faced delays or required additional structuring to meet lender requirements due to exclusions in policies or rising premium costs.
“These changes have not yet made projects ‘unbankable,’ but we have encountered real challenges,” said Cecile Luciano, director of structured finance energy origination at NORD/LB. “For example, I’ve seen a project in a flood-prone area where the insurance policy excluded flooding entirely.”
“That’s not something we can accept, forcing developers to find coverage elsewhere, often in a different market. We are seeing more engagement between lenders, insurance advisors, brokers, and developers to ensure that policies are bankable from the start. This needs to happen early in the process, ideally before construction insurance is finalised,” Luciano added.
