The Insurance Industry and Renewable Energy By John McLane, President, GCube Insurance Services, Inc.
Insurance buyers expect their insurer to be able to return them to financial good health when something unforeseen happens. For that reason insurance companies are generally among the most conservative financial service institutions. Insurers don't address risks they don't understand or can't quantify. With this said, it is noteworthy that the property, liability and life segments of the insurance industry are all very active in their support on renewable energy today in two very specific ways.
First, as a direct result of the demonstrated improvements in manufacturing, construction, operations, and the overall risk profile of renewable energy, insurers now actively compete to insure the risks on the basis of pricing and coverage conditions. Today, there are at least 15 major international and numerous regional insurers addressing various forms of risks directly related to renewable energy projects, many of them with divisions now focused exclusively on renewable energy business. Insurance coverages are much broader, and costs are a fraction of what they were just 10 years ago. In fact, issues in financing renewable energy projects are driving some of the most innovative changes under consideration in property and liability insurance today. Finally, because renewable energy presents a clear opportunity for business growth, the number of insures competing for business is forecasted to increase, leading to an even more robust competitive market favorable for insurance buyers.
Second, insurers hold capital in reserve in order to be prepared to pay claims presented by the risks they insure. Those investments must be secure so the insurer is postured to meet commitments to policyholders. It is noteworthy then that insurers are also among the largest sources of capital for investment for renewable energy projects. Additionally, insurers include sustainability criteria in their investment strategy and are active participants in organizations such as Ceres. Consequently, their investment strategies take on two roles, a search for reliable investment return, and also investment in activities that will ultimately contribute to a safer and more sustainable economy, and contribute to lower losses which are funded by premiums paid by insurance buyers.
Renewable energy has been integrated extensively and permanently into the global economy. Insurance is just one of the segments of the economy that has seized the opportunity for investment in renewable energy ventures, sustainable safer business ventures that have a social return as well as a financial return. There aren't too many segments of the economy that provide that kind of opportunity today. Renewable energy deserves the support and consideration of policy makers.
As policy is debated today, it is important for participants in the debate to remember that all the segments of our economy have a policy infrastructure that has contributed to their current position in our economy. Those policies may have been put in place a long time ago, and today we may think they are non-existent or neutral. They aren't. Effective policy providing stronger support for renewable energy development is needed today to support a sustainable robust economy in the future. Our policy makers need to seize the opportunity for a safer, cleaner more sustainable energy supply presented by renewable energy in the same way other segments of our economy and society have. We need strong, stable national policies including a renewable portfolio standard and a mechanism to monetize carbon to enable the growth of the renewable energy industry.
John McLane President, GCube Insurance Services, Inc.
As President of GCube Insurance Services, Inc. John McLane brings over 30 years of operating experience to all facets of insurance and risk financing programs for utility scale renewable energy projects. He is responsible for building and leading the organization as it provides of a comprehensive portfolio of insurance services for renewable energy projects in wind, solar, biofuels, wave and tidal around the globe.