Global energy shift means opportunities for insurers

The Asia-Pacific region will drive growth in the energy sector and could well account for 50 percent of the total annual global energy financing by 2030. This means big opportunities for insurers in the region as investments in infrastructure requires protection.

That was one of the conclusions of a report by Swiss Re called Building a Sustainable Energy Future: Risks and Opportunities. Under one scenario, the total annual losses across the energy sector could reach up to $42 billion by 2030. It suggested that as well as providing financial protection against these losses, insurers are well positioned to use their risk management expertise to help avoid losses in the first place.

“Insurers should support the further development of low carbon-intensive power production,” said Agostino Galvagni, chief executive of Swiss Re Corporate Solutions. “They need to be innovative and provide solutions along the whole value chain. For example, insurers can enable project financing through construction insurance and reduce cash flow volatility of intermittent energy production through weather risk transfer solutions.”

The overall report also examined the impact of the changing global energy mix on climate change. It said the composition of our future global energy mix is uncertain. On the one hand, renewable energy sources are established in the market and the growth in energy production from sources such as solar and wind will continue to grow. On the other hand, existing fossil fuel and nuclear technologies will continue to play an important role.

“This study clearly shows that renewable energy will play an important role in the global power mix of the future,” said Andreas Spiegel, head of sustainability & political risk at Swiss Re. “At the same time it shows that adaptation to climate change will increase in importance because the window of opportunity for mitigating climate change is getting much narrower.”