Climate change is driving an urgent shift to renewable energy, creating demand for insurance products that support sustainable infrastructure. Outsized losses due to natural catastrophes and an increase in climate disasters, along with the passage of landmark legislation, have refocused the spotlight on renewable energy. As a result, climate insurance has emerged as a new and critical sector of the insurance industry. Insurtechs who have expertise in
Renewable energies pave the way for insurtechs
Growth in the renewable energy industry is skyrocketing as the world grapples with climate change and companies strive to transition to renewable energy sources. According to the International Energy Agency, the world is expected to build more renewable assets in the next five years as we have in the past 20 — in fact, we'll have to meet this lofty goal to meet the zero emissions commitments by 2050. The global solar energy market alone will continue to explode, increasing from today's 3% of U.S. electricity supply to 40% by 2035. However, this rapid, massive growth in the renewable energy space has proven challenging for insurers. Increased natural catastrophe losses and a lack of renewable energy underwriting experience have resulted in many traditional carriers raising premiums or retreating altogether, ultimately impacting project financing for renewable providers.
Although still in its early stages, insurtech has revolutionized the insurance industry, helping to make coverage more accessible, affordable and efficient. Insurtech growth has proliferated across all product lines, with companies adopting the use of automation, data analytics, connected devices, and machine learning to assess risk, build holistic, on-demand policies and streamline claims and payment processes. Insurtech market size statistics and growth predictions vary widely, but according to a recent
One thing remains certain: digital transformation and fighting climate change continue to be prioritized and the insurance industry is poised to be one of the biggest stakeholders.
The role of climate insurtechs
Insurers have more access to data than nearly any other industry, but it is not always detailed or organized enough to take action. Armed with the right technology, there's an opportunity for insurtech firms to use their own data and expertise in forming an underwriting view unique to the climate sector. Insurtechs that are able to optimize the explosion of better data to accurately model and price risk, as well as inform best practices among insureds, will become a vital link in the fight against climate change, enabling renewable energy providers to keep up with meteoric demand.
Although climate specific insurtechs are relatively new, there are several out there that are providing innovative products and services directly related to mitigating climate risk and enabling the transition to clean energy.
Some climate focused insurtechs have set their sites on enabling financing in the climate space. For example, managing general underwriter
Other companies take a view on property risk by improving modeling results.
The urgent shift to renewable energy driven by climate change is arguably one of the biggest macroeconomic trends and opportunities of our generation, and climate insurance is playing a critical role. Today, renewable asset owners and their insurers are undergoing an evolution in the way they approach risk. Using the influx of available data for solar, wind, and battery assets has become key to better understanding and protecting against exposures from natural catastrophes and extreme weather events. Insurtechs offer the promise of furthering the energy transition in limitless ways as they continue to harness technology and data to mitigate climate risk.
