Insurance and innovation are often conceived of as opposites — innovation inevitably introduces risk and insurers are inherently risk-averse. But the very fact that insurers work to minimise risk means they are in a unique position to support innovation. What is PERse’s view?

We work a lot with the OEMs. If they were looking to do a blade extension, for instance, they would come to us to understand whether insurability is an issue and whether it could impact their client. We are very collaborative and this helps to balance risk and innovation. We hang our hat a lot on that.

We need innovation in this industry to thrive – we can’t be afraid of it. It is important to see things on a systemic level. For example, if a bad batch of blades is out there, is it the batch or the design? How do you mitigate against potential losses?

It shouldn’t be about simply paying a claim and walking away – we need to learn and the client needs to learn. Forensics are important along the value chain.

In 2017, low wind speeds topped the list of potential sources of financial risk faced by onshore wind developers, owners and operators globally, according to research we covered, greater than mechanical and electrical breakdown. How has 2018 looked? And going forward?

There have been variations from the ‘norm’ but nothing super-critical like in 2017. We have learned in this area – and all insurers in renewables have products for low-wind coverage and lack of sun. Risk management changed in 2017. Those wind anomalies in the US southwest brought the issue to the fore for the industry.

There are two schools of thinking on this. Did the winds blow as we forecasted? Or were the forecasts perhaps overly rosy because the original plan for a wind farm had some investment-positive assumptions? I think going forward, yes, we will see anomalies. Climate change is having an impact, but the industry is getting better at forecasting these things, and turbines are getting better at handling variations in wind speed.

According to research used in a Recharge feature, there are roughly 50 turbine fires every year — one for every 6,000 machines — and this problem is growing and getting more expensive. How serious are turbine fires in the insurance big picture?

This is a very topical subject. Low probability, high salience. There are certain turbines that are more prone to [fires] but on an actuarial basis we are not seeing the problem getting worse. The cost of turbine fires to the industry is still something of a sticking point: a turbine costs $3m but carriers are paying out on a loss of $7m – decommissioning, recommissioning, permitting, crane costs – these are all to be factored in. So it depends where you measure the ‘cost’ to the industry.

As the industry grows and turbines scale up, we just have to stay ahead of it and make sure there is fairness in how the costs associated with turbine fires are covered.

New (and sometimes inexperienced) underwriters have been entering the renewables space, premiums have been under-priced — with a 150% drop in price over the past 7-8 years — and some major players withdrawing from the class following significant losses. What fundamental market shifts do you expect as a result of the expanding global wind and solar build-out?

Well, it wasn’t so long ago that we were the ‘new’ underwriter [PERse set up in 2011]. But we believe that competition is healthy – and the industry saw an around 20% drop in their rates in 2012. I’m speaking tongue in cheek of course. We don’t like to compete on price. There is a price. But what else are you bringing? New ideas, new products, new structures?

You really have to be in it to support the growth of the industry in the long-term. Energy transition is the long game.

Climate change and the frequency of accompanying hurricanes, wildfires and other Nat Cat [Natural Catastrophe] events is increasing and making headlines around the world. Aside from the terrible human losses sustained, these events have a significant impact on renewable-energy assets and, consequently, on the corresponding insurance markets. How do you see insurers adjusting to extreme weather events?

The industry’s largest ‘natural hazard’ losses – and these weren’t even ‘Cat’, which has to be a named storm and so on – in the last two years were a 48-hour rain storm over a solar site in North Carolina – the panels looked like they were floating in the water. It’s an impossible situation in a way: you can model for the impact of severe weather but the weather is getting more extreme, and that means you need to have a model that is constantly being recalibrated.

When Hurricane Maria came in past Puerto Rico in 2017, there were wind farms nearby where the turbines – the ones that were standing – looked like candle sticks, and there were turbines that had been pitched and had been able to ride it out. That is how different the outcomes can be.

With climate change, we will have to learn from our losses and remap the forecast modelling. We will have to continue to adapt different ways of underwriting around that.