There is a greater need for public-private partnerships (PPPs) when it comes to renewable energy projects, panelists at the Pan-Asia Risk & Insurance Management Association’s (Parima) 2021 Resilience Week conference said yesterday.
If the world is to avoid an energy crisis and transition to green energy, greater government support in the form of subsidies is necessary because the renewable energy market has not been profitable for the insurance industry for “many, many years”, said Willem van Wyk, HDI Global’s regional market manager for Asean and Australasia.
While 65% of insurers insure oil and gas projects, only about 35% insure green energy projects, van Wyk said during an October 26 panel discussion titled “Brace for impact: managing the risks behind mega trends”.
Renewable energy often involves new technology and green energy projects are often set up in harsh environments with high heat and/or high winds which are “not models that we like”, van Wyk said. Therefore, PPPs are often necessary to successfully navigate the high exposure especially, van Wyk added.
Last November, Asean market leaders and regulators met and discussed various priorities and the need for greater collaboration.
The need to transition from conventional energy projects to renewable energy was identified as one of the four major megatrends in the region. A rising population coupled with economic growth is giving rise to an increasing demand for energy, said Edward Ler, Chubb’s head of South-East Asia, during the same panel discussion.
Many European countries are no longer financing coal projects for want of insurance coverage, said van Wyk, adding that there are a few insurance companies in Asia that insure coal power projects. The insurance sector has a critical role to play because energy projects cannot secure financing without insurance, he noted.
As reported, Tokio Marine Holdings recently announced that it will no longer underwrite or invest in thermal coal mining projects in Japan or overseas. This makes Tokio Marine the first Japanese insurer to back out of underwriting or investing thermal coal mining. Last September, the insurer announced that it would not underwrite or finance any coal-fired power generation projects.
The world is in a transition period and the insurance industry has “not adapted fast enough”, added van Wyk. “We will need to adapt quickly in the next few years.” The danger lies in insurance companies moving away from coal-based energy projects but not moving fast enough to insure renewable energy projects, he added.
Urging for a greater degree of collaboration between governments and insurance companies, Ler said that working with governments is necessary to resolve some of the most pressing issues.
Parima chairman Franck Baron addressed the issue of climate change during the opening plenary session where he urged risk managers to ensure that companies act with haste while investing more in resilience.
“Businesses are operating in a world where it is not enough to talk the talk where the climate crisis is concerned,” Baron said, adding that failing to act would have grave legal, regulatory, reputational and ultimately existential consequences.