Report Preview: Gone with the Wind

In late January, GCube is set to launch “Gone with the Wind”, an in-depth report covering the growth of the weather risk transfer market in the renewable energy sector, its drivers and the way such products are structured and delivered in practice. GCube’s Weather Risk Analyst, Geoffrey Taunton-Collins, provides a brief overview of what is contained in the report, and how GCube’s supporting brokers and insureds can benefit.

Managing resource risk is one of the more complex challenges faced by the global renewable energy sector. While project developers and operators, supported by the insurance sector, have been mitigating the impact of mechanical breakdown, logistical and Nat Cat losses since day one, the industry has been slower to adopt mechanisms to safeguard against the impact of the weather itself on project revenues.

As the industry has matured, however, uptake of weather risk transfer products has seen a significant increase. High-profile low wind speed events in established markets such as the USA and Australia, along with the emergence of more reliable and affordable hedging structures that take advantage of improved resource data and analysis techniques, are driving demand from diligent asset managers across the globe.

Furthermore, there is a growing appreciation that these structures, delivered effectively, not only stabilise revenues, but also add value to a project when it comes to financing and refinancing.

Yet there are still barriers standing in the way of widespread adoption. At GCube, we have recognised that there is room for improvement when it comes to helping the industry understand the product itself and its delivery mechanisms. While the concept of weather risk transfer itself is relatively straightforward, a lack of standardised terminology and unfamiliarity with the available product structures may pose an unnecessary obstacle to the procurement process.

Gone with the Wind is designed to answer some of the questions project operators may still have about how weather risk transfer can add value to their assets and portfolios. It aims to provide a clear and concise summary of the weather risk problem, the weather risk transfer product, and its financial benefits.

Often it can prove more enlightening to hear directly from your industry peers – so, in addition to our own in-house analysis, we have conducted interviews with a number of players who are heavily involved in one way or another with weather risk transfer and its renewable energy applications.

In the report, we speak to Infigen about what motivated their decision to buy weather risk transfer for a portfolio of wind projects in Australia. We also talk to global law firm Drinker, Biddle & Reath about the wind turbine wake effect and its implications from a performance and legal perspective. Weather experts Vaisala provide an insight into how the availability of data and more advanced measurement and forecasting techniques are changing approaches to weather risk management. Finally, risk transfer intermediary REsurety talks us through how the financial benefits of weather risk transfer can be assessed.

As ever, we hope that Gone with the Wind sparks further discussion amongst finance directors and risk, asset and claims managers, providing a tool for knowledge sharing, and ultimately increasing market understanding about the value of weather risk transfer.

The report will be available to our insured clients and supporting brokers in late January. To register your interest in advance, please email info@gcube-insurance.com. In the meantime, please don’t hesitate to get in touch directly via geoff.tauntoncollins@gcube-insurance.com to discuss how GCube can support you with your weather risk requirements.

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