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The financial impacts of Extreme Weather and Natural Catastrophe events are outpacing the development of mitigation strategies in the North American renewables market, concludes the latest market insights report from GCube Insurance™ (GCube), a leading underwriter for renewable energy projects.
In its North American Nat Cat Update, GCube – a member of the Tokio Marine HCC group of companies with US offices in Orange County, New York City, and Houston – reports that market correction hasn’t gone far enough to address the growing severity of Nat Cat and Extreme Weather events. A softening of rates could jeopardise the sustainable growth of US wind and solar faced with these evolving risks.
The US renewables market has just experienced its worst summer on record for Nat Cat claims, with unmodelled Extreme Weather events proving far more prevalent and damaging than traditional Nat Cat. In particular, hail losses experienced this year in Texas are projected to reach $300m – almost ten times the estimated losses from 2020’s Hurricane Hanna.
While total claims values are still being calculated, multiple instances of losses exceeding sub-limits of up to $50 million, due to Extreme Weather events like hail, tornados, and derechos, make clear the need for improved modeling and the more effective use of existing weather data. Solar technologies, for example, have proven particularly vulnerable to hail, exposing weaknesses in the sector’s current standards of impact testing.
Furthermore, speaking at GCube’s annual Advisory Council meeting in September, leaders from the US renewable energy insurance market highlighted concerns around the ‘perfect storm’ of issues that are exacerbating the total cost of Nat Cat claims. The supply chain challenge in particular is keenly felt in the US market, with significant financial implications tied to increased downtime and component costs.
“While the increasing frequency of Extreme Weather and Nat Cat events is not surprising to us, the rising severity of losses, and the industry’s continued difficulty in managing these risks, is a concerning trend,” commented Fraser McLachlan, CEO, GCube. “The unprecedented growth potential unlocked by the Inflation Reduction Act will count for little if the North American renewables sector is unable to combat Extreme weather risks.”
“Concerted effort is needed across the value chain to strengthen policies, improve data utilisation, and update modeling and testing procedures, and support sustainable growth for the sector. Our latest report issues a clear call for collaboration in the US renewables industry to develop measures to combat the fallout of Extreme Weather, and support a stable, successful energy transition.”
All data can be found within GCube’s North American Nat Cat Update.