Energy

Written by Jack McAlone and Will Jones

Key developments in 2024 

In last year's Annual Insurance Review, we anticipated that we would see further growth in hydrogen power and that the renewable energy insurance market would continue to respond to this. 

According to the Hydrogen Council, global investment in hydrogen projects reached US$680bn in 2024, an eightfold increase on the total figure for 2020¹. Meanwhile, the number of clean hydrogen projects in the pipeline globally has risen from 228 in December 2020 to 1,572 in May 2024². In response to that significant growth, the last few years have seen various insurers and brokers launching new facilities for blue and green hydrogen projects.

More broadly, the global move towards renewable energy has continued to grow momentum. This was underscored by the resolution at COP29 in November 2024 to triple the amount of climate finance made available by developed member countries to developing member countries by 2035. 

The energy insurance market has responded positively to the developing focus on renewable energy - particularly in respect of those risks involving proven technology, with low natural catastrophe risk and good operating history³. The growing importance of renewables has also been reflected in the launching of new renewables-focused MGAs – Volt Underwriting and Novagen⁴⁵. 

Notably, FM Global also announced the launch of a "Renewable Energy Unit" in May 2024 to assist its clients with the risk management aspects of moving to renewable technologies⁶.

Whilst there are clear opportunities for insurers operating in the renewables market, there are inherent challenges and uncertainties in the underwriting of novel technologies - particularly as concerns pricing. 

What to look out for in 2025

We anticipate that 2025 will see further growth in the energy insurance market - in terms of capacity, participation, and the nature and extent of risks covered.

In addition to the environmental concerns surrounding the use of fossil fuels, the combination of reducing interest rates, government incentives (e.g. tax breaks, funding schemes) and demands for energy security in Europe following the instability caused by the war in Ukraine has created additional incentives to invest in renewable energy as an area. This favourable environment has led some to predict an uptick in growth throughout 2025  for the sector, with a particular focus on important new technology such as battery energy storage systems (BESS) and carbon capture.

Furthermore, analysts expect that countries in the Middle East and North Africa will add to their renewable energy capacity significantly, with the International Energy Agency estimating that the region will add 62 GW to its renewable energy capacity over the next five years⁸. 

The above presents both opportunities and challenges for insurers. The further growth of the renewable energy sector will provide an opportunity to write business in a fast-developing and more 'ESG-friendly' market – thus providing an opportunity to grow premium income and enhance their standing as responsible businesses (which may be seen as increasingly important in light of recent Just Stop Oil / XR protests). However, that is to be set against the significant challenges from an underwriting perspective arising from the limited data available for different locations and new forms of renewable energy technology, combined with the historically high level of losses arising from weather and human error/ defect in the renewables sector⁹. 

Furthermore, as new technologies such as BESS are expected to become more prevalent over the coming years, it will be interesting to see the ways in which the insurance market responds – both as concerns the nature of the cover provided and, indeed, the appetite to underwrite these new risks.

Explore Annual Insurance Review 2025

¹https://hydrogencouncil.com/wp-content/uploads/2024/09/Hydrogen-Insights-2024.pdf
²https://hydrogencouncil.com/wp-content/uploads/2024/09/Hydrogen-Insights-2024.pdf
³https://www.wtwco.com/en-ie/insights/2024/07/renewable-energy-market-review-2024 (page 7)
⁴https://www.reuters.com/business/energy/renewable-energy-offers-cost-opportunity-insurance-sector-2024-11-07/
⁵https://www.reuters.com/business/energy/renewable-energy-offers-cost-opportunity-insurance-sector-2024-11-07/
⁶https://www.prnewswire.com/news-releases/fm-global-launches-renewable-energy-unit-to-guide-clients-through-their-energy-transition-302138448.html
⁷https://kpmg.com/uk/en/home/industries/energy-and-natural-resources/energy-transition-investment-outlook-2025-and-beyond.html
⁸https://www.weforum.org/stories/2024/04/renewable-energy-capacity-mena/
⁹https://www.insurancebusinessmag.com/uk/news/construction-engineering/increased-risks-for-renewables-as-construction-booms-worldwide--gcube-504893.aspx