Insurance premiums for renewable energy projects are expected to rise in 2021 as the renewable energy sector continues to underperform due to a sustained period of claim activity, according to a joint report from BMS Group and GCube Underwriting (GCube).
The joint report provided a detailed breakdown of the renewable energy sector's claims activity in the Australian market between 2016 and 2020. It showed that claims activity increased between 2017 and 2019, which correlates to the increased project construction in the sector from 2015 to 2017. This period of sustained claim activity, which has grown with the booming industry, would likely result in rising insurance premiums.
Claims in the renewable energy sector were related to contractor error during construction, mechanical and electrical failures, defective equipment or workmanship, aging or out of warranty technology, and natural catastrophe events.
The report also expects policy coverage to decrease, with BMS advising insurers to focus on subcontractors and project locations.
“More than ever, we're seeing repeated incidents across the globe from certain OEMs [original equipment manufacturers] in both wind and solar … there will be a time when these incidents are no longer fortuitous,” said GCube chief executive officer Fraser McLachlan.
BMS said presenting projects in the best possible light will help insurers make informed decisions around their potential participation. It recommended a “structured approach to market engagement” based on early preparation and planning, risk workshop, a focused engineering & operations approach, risk prospectus, and insurer engagement.
The insurance broking specialist advised insurers to focus on key areas of underwriting criteria, including project location, technology, personnel experience, grid connection, and risk management.
