In 2018, we have reached a number of important milestones – 25 years of insuring renewable energy projects, 10 years under the GCube name, and $500 million in claims paid.
In light of all this, you may think that we’ve seen it all, but the fact is, we continue to be surprised by the pace of change and evolution in the sector. Our ability to respond to this change – and an ever-evolving risk landscape – is what defines us as a business.
Over the past 10 years, we’ve witnessed new technologies constantly reshaping the sector. This history means that we know it’s vital not to see insurance in contrast to innovation, and as these technologies continue to evolve we will support industry innovation by providing value beyond the insurance transaction. Similarly, we know that there are some risks that, nowadays, you simply expect to be in control of – such as downtime from mechanical or electrical breakdown.
But just when you think you have a grasp on all of the risks to your renewable energy asset, new risks like cyberattack and extreme weather rise to the fore. For example, the risk landscape for US wind energy developers and operators has shifted dramatically since we published our “Risky Business” report in May 2017.
Resource risk topped 2017’s list, followed by the threat of mechanical and electrical breakdown, political and regulatory risks, risks posed to projects by development in remote locations, and finished with extreme weather and Nat Cat. Cyber risk was not much more than a footnote.
However, 2018 saw increasingly unpredictable climatic phenomena causing both extreme Nat Cat events and project underperformance. In April’s “Renewable Energy Nat Cat Briefing” we highlighted the impact of losses from hurricanes in Puerto Rico, earthquakes in Mexico, and US wildfires on renewable energy investors and operators, recommending that underwriters ensure they are not overexposed as the risks from weather perils increase. The financial severity of Nat Cat events continues to rise – as evidenced by the recent California wildfires.
It’s clear that factors outside of our control are shaping the insurance landscape more and more. In our report “Assessing the Major Risks to the US Wind Market” we discussed these risks and encouraged developers to mitigate them by engaging with their insurer throughout the lifecycle of their projects. It’s absolutely essential to share lessons learnt to ensure success not just for individual assets, but for the sector as whole.
Cyber risk has been a dormant but highly potent and unpredictable threat to renewable project developers and project owners. For wind energy projects, the risk from attack has been elevated by technological advancements which enable remote access control – leaving projects more vulnerable to hackers who can use access to one turbine as a hub from which to control the entire farm.
Then, in March this year the US accused Russia of a series of cyberattacks on its infrastructure, including the energy grid. With tensions rising between the two countries, the threat of Russian hackers targeting American renewable energy projects is escalating – while European firms are not immune to this risk.
Insurance can give you a degree of control and certainty when it comes to managing these external threats. This year, in response to rising demand from our insured clients, particularly in the US, we launched our Cyber Risk policy.
The first of its kind, the policy covers operational downtime incurred as a result of a cyberattack and is specifically designed to protect renewable energy projects. These attacks will likely increase in volume as renewables operators continue to invest in digital solutions, and in launching this policy we remain ahead of the curve in addressing our clients’ evolving exposures.
In our final newsletter of the year we bring you a review of GCube’s media coverage in 2018 and share key 2019 dates for your diary.
Enjoy the festive period – I look forward to updating you in the New Year!
CEO, GCube Underwriting Ltd.