
A newly released GCube report looks at what will happen to the renewable energy sector with the potential of constant Nat CATs.

The insurance industry could turn its back on the renewable energy sector if it survives another year of unprecedented natural disaster losses like 2022.
That’s the view of Fraser McLachlan, CEO of GCube Insurance, who recently published the North American Nat CAT Update report.
The study found that the North American renewable energy industry continues to experience record losses running into the hundreds of millions of dollars from extreme weather events this summer, McLachlan said. Risk & Insurance® He estimated that total losses would be $700 million, excluding Hurricane Ian, with insured losses ranging between $350m to $400m.
“This is the worst year for natural disasters we’ve seen to date,” McLachlan said. “And the trend is only going to get worse, as we’ve seen in previous years.
“This is the perfect storm: there are many catastrophic losses in a short period of time; insurers hit $50 billion to $70 billion in losses from Hurricane Ian; and reinsurers must raise prices to cover their costs. And my biggest fear is that, if we have another year like this, insurers may decide to stop offering coverage for those who have been renewed.
Then there will be more supply chain shortages and delays, and significantly increased repair and replacement costs for the insured due to the current inflationary environment. The matter was raised recently in September by the leaders of the renewable energy insurance market in the US at the annual advisory council meeting of GCube.
Dramatic Weather Pattern Shifts
According to the GCube report, as a result of some of the most devastating natural disasters in recent years due to a dramatic change in weather patterns, the renewables sector has surpassed most of its sub-limits are up to $50m. Most of the damage comes from unmodeled weather events like hail and storms, which are more widespread and damaging than traditional disasters like hurricanes and floods.
In addition, as renewable projects grow, so a larger surface area is exposed to these events. The most vulnerable are solar installations, with 80% of claims arising from external events such as flooding, hail and tornadoes.
Even worse, current predictive models struggle to keep up with unprecedented events. And the financial impact of these losses has hindered the development of robust mitigation strategies to address the problem.
“While the increasing frequency of severe weather and Nat CAT events is no surprise to us, the increasing severity of losses and the continued difficulty of the industry in managing these risks is a trend,” said McLachlan. “The unprecedented growth potential opened up by the Inflation Reduction Act will be limited if North America’s renewables sector is unable to withstand severe weather risks.”
The truth is that the market correction has not been enough to address the increasing severity of these events and protect the sustainable development of the US renewables sector, the study found. But the problem is so serious, that a significant rate increase could jeopardize the growth of US wind and the solar sector which faces emerging risks, it warned.
“The solar market, in particular, has been underpriced for years now,” McLachlan said. “Insureds are so used to a fixed price that when it has to be set so that the re/insurers can cover their costs, it comes as a huge shock and often means they can’t continue building the renewed project. because they didn’t include it in their initial budgeting.”
Adding Unmodeled Events
The situation will only get worse, the report reveals, as unmodeled events are increasing, surpassing modeled disasters in terms of frequency, with 40 severe storms consisting of strong winds, rain that ice, tornadoes and derechos recorded in the last three years. That compares to 13 traditional windstorm events like hurricanes during the same period.
They are also worse, as evidenced by the fact that losses from rain in Texas alone this year are expected to reach more than $300m. For context, that’s nearly 10 times the estimated losses from Hurricane Hanna in 2020.
Among the installations that have suffered the most damage, solar has been more affected than wind since 2020, both in terms of the number of claims and severity, with projects in operation and those under construction equally exposed to losses. That contrasts with technological advances in wind turbines, which focus on scale, strength and weather proofing against extreme events like hurricanes.
The study concluded that the renewables industry needs to do more to improve the quality and strength of the materials used in its structures and facilities. For example, solar technologies have proven particularly vulnerable to hail, exposing weaknesses in the sector’s current impact testing standards: the International Electrotechnical Commission’s hail tests use 25mm projectiles, which are half the size of the average hail from a severe storm.
Better Historical Use of Data
Going forward, risk modelers and insurers must use available historical weather data to track these unmodeled events. By determining an established pattern of events, they can more accurately assess, mitigate and underwrite risk.
Losses should also be logged separately for each type of event to help model more effectively against specific risks. For example, the distinction between a tornado and derechos.
For their part, project managers and renewable energy companies must work with their insurers and brokers to regularly revise sub-limits. That requires using the latest understanding of natural disaster and severe weather hazards to ensure their assets are fully covered in the event of a claim.
McLachlan concluded: “A concerted effort across the value chain is needed to strengthen policies, improve the use of data and update modeling and testing methods and support sustainable growth for the sector. Our The latest report issued a clarion call for collaboration with the US renewables industry to take steps to combat the fallout from extreme weather and support a sustainable, successful energy transition. &