Insuring renewable resources is an expanding field in Canada as the country makes a transition to alternate forms of energy. And although much is still to be learned about these new technologies, global data can help Canadian insurers assess their risks, says an expert in the area.

“We’re looking at the Green transition and how we’re trying to help insurers and brokers understand the risks of that transition,” Robert Paxton, recently appointed managing director for Charles Taylor’s Canadian operations, tells Canadian Underwriter in a November interview.

“One of the questions I’m probably asked the most by our global insurers, is: ‘How can you help us improve the profitability of renewable energy for us?’

“Insurers are moving away from traditional non-green energy, which is largely well-known technology, where they can map out the risks quite well. It’s been a profitable line of business.

“Yet, they’re drawing away from that and moving towards renewables, which, because it’s a newer and evolving technology, there isn’t the historical data for them to model in quite the same way. So, we’re trying to help with that by providing insights and data into those new losses on the basis of our global experience.”

Some of that data comes from the experience with renewable energy resources in Europe, where government subsidies for renewable energy resources are more advanced than they are in Canada.

But claims data is available for renewable energy resources, even if there may not yet be as much as for the more mature energy resources like oil and gas, Paxton says.

“Solar panels, wind farms, they have been in place for quite some time now, and there has been a lot of learnings from that,” says Paxton. “I think the key is, we’re sharing those learnings.

“There may be less data, or at least a shorter period of time in collecting that data. Which I am sure an actuary would say makes it less reliable, because you don’t have the consistency you would have in the oil and gas industries. But there is data available and there are learnings we can apply.”

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In applying those learnings, Paxton says, insurers must account for natural catastrophe (NatCat) risks specific to particular regions. For example, he cited Calgary’s record hailstorm in August, which caused about $2.8 billion in insured losses. It was a record-setting amount of damage, topping the combined total of almost $2-billion worth of damage caused by hailstorms in 2020 ($1.2 billion) and 2021 ($700 million).

“A risk we would have in renewable energy in Canada, which you wouldn’t have to such a degree in other places, would be NatCat losses,” Paxton says. “For example, you could have a solar farm in the so-called ‘hailstorm alley’ in Alberta, and then you have a hailstorm event that can wipe out the entire solar farm. That risk is a huge factor in certain areas, and it’s a much lower factor in others.”

The thing is, he adds, technologies exist to prevent damage to renewable energy resources.

“You can actually mitigate the damage in ways,” he says. “Depending on if solar trackers are used, the solar panels can be rotated, changing their angle so that they’re in less direct contact with the hail. So, it will be glancing blow.”

Business interruption is another risk to consider with renewable technologies. Sometimes those losses can be a much larger factor than the initial physical damage losses.

“We’ve handled losses with wind farms, where, based on pure vandalism or theft, copper wiring has been taken,” Paxton says. “The value of the copper wire was very low. But the fact that those windmills are offline now, potentially for a month or two while you’re sourcing the material and fixing it, can be a very significant loss.

“I think that’s an important thing to think about. If you’re talking about an oil rig, you’re not thinking about [the risk] in that quite that same way. Whereas wind farms are typically in fields. Generally speaking, there aren’t large security fences around them.

“And so, somebody could come in, strip out a few wires, take a few hundred dollars’ worth of copper, and it could be a multi-million-dollar BI [business interruption] loss. So, these are learnings that can be shared.”

 

Feature image courtesy of iStock.com/laughingmango