“Wildfire season” has long been a fixture in the calendar in the United States, but it is starting to become a year-round reality for residents and businesses on the West Coast. With wildfires becoming increasingly erratic and unpredictable, renewable energy asset owners – and the insurance market – are now facing unprecedented exposure.
Of the six largest wildfires in Californian state history, five have started in the last two months alone, with the August Complex fire so far scorching over 850,000 acres, more than double the scale of the next largest wildfire on record. The question now is, is this the new normal, and how can we effectively safeguard renewables infrastructure if it is?
A brief look at the numbers reveals a clear trend developing. Across the board, Nat Cat events are increasing in frequency and severity, with wildfires also burning for longer durations and in unexpected locations. The boundaries of risk zones are subsequently becoming less certain, putting Insureds’ projects at increasing risk of fire damage – particularly as many renewables projects are often located away from residential or commercial areas.
The tightening of global supply chains this year has only exacerbated the wildfire threat. With renewable energy owners in the US continuing to stockpile equipment to meet PTC deadlines and rapid innovation leaving equipment obsolete within a few years, replacing assets damaged by fire is becoming increasingly difficult – raising the amount of downtime and lost revenue for renewable energy owners.
The potential financial impact of fire damage becomes even more severe when we consider the growing scale of renewables assets and projects, with larger assets far more costly to repair and replace. In the past two months, the market has seen two $20 million-plus Californian solar losses due to fire damage.
What is most worrying about these losses is that they could have been mitigated or reduced with better project maintenance.
The extreme heat seen in California in recent months has made it easier than ever for fires to start. With even a stray cigarette, or some broken glass now capable of starting an inferno, as an industry we cannot take a complacent attitude to critical mitigation strategies like brush control. This topic is discussed further in our latest ‘Interview with an Underwriter’ with Rosa Van Reyk.
The risk profile of renewable energy projects continues to evolve, with fire damage now a more significant threat to the sustainability of the US renewables insurance market. As we’ve discussed previously, as the market faces up to this threat, we’ve seen ongoing movement and consolidation in the space, and underwriters have increasingly been forced to ‘reset the benchmark’ on rates to mitigate the impact of consistent losses and provide more sustainable coverage for Insureds.
Having taken a firm position on the business we accept, and decline, GCube continues to strengthen following the acquisition by TMHCC in June and we have seen a rising volume of business as a result. To ensure that we continue to provide industry-leading claims expertise to support growing demand we are excited to be bringing in a raft of new talent and experience across our business – with notable additions being made to our offshore underwriting team in the form of Joshua Cantwell, Zoe Massie and Georgia Ward, further strengthening our offshore wind team in Amsterdam and also New York.
Our US team has also undergone some restructuring over the summer and we are now in a very strong position. With new hires Devon Krajacic and Matthew Pampin being added to the Newport Beach and New York offices respectively as Underwriting Assistants we are looking forward to announcing more new hires as GCube continues to offer quality and comprehensive service across the renewable energy Industry to our clients.
You can read more about this team expansion in today’s edition. As ever, enjoy the newsletter, and don’t hesitate to get in touch with any queries or comments.