Page 80 - India Insurance Report 2023- BIMTECH

68 India Insurance Report - Series II

Systemic risk will get increased regulatory scrutiny in 2023, according to market players. The focus
will be on critical infrastructure industries such as financial services, energy, health care and
communications, and will extend to several other sectors,” said a 2023 cyber insurance market outlook
from Arthur J. Gallagher.

4.2.Renewable Energy

The renewable energy insurance market is set to grow by more than $200 billion worldwide in the
next decade. Solar and wind outpace other forms of renewable energy deployment in North America,
while the continent trails Europe and parts of Asia in developing offshore renewable sources.

Solar is on the rise, driven by its affordability as well as federal incentives included in the Inflation
Reduction Act. Solar has experienced a 33% average annual growth rate in the last decade, according to
the Solar Energy Industries Association, and with that expansion comes increased exposure to natural
catastrophe risks.

An October report from GCube Underwriting found that natural catastrophes and extreme weather
event claims continue to hit the renewables sector with greater frequency and severity. The report
found that Texas hailstorms resulted in solar losses almost twice as severe as the other top renewable
losses of the last three years combined. Advancements in solar engineering have led to the development
of panels that are more resistant by moving away from hail or turning in the right direction to protect
themselves. However, this emerging technology comes at a much higher price tag that may not appeal
to buyers.

Plus, insurers have begun charging solar developers’ higher premiums with large deductibles in
response to recent hail losses. For example, in 2019, it was really cheap for a solar developer to pay
someone else to take the risk at the end of the day, but in recent times, clients have been asked to retain
a deductible before the insurance policy kicks in. The solar industry has begun an era of “really high
innovation” to understand what is working and what is not.

The wind energy sector, the most prevalent source of renewable electricity in the U.S., has also
experienced multiple significant loss events in the past few years, including Hurricane Hanna in 2020
and Tropical Storm Nicholas in 2021. The storms led to losses of $25 million and $35 million, according
to GCube. 2021 Winter Storm Uri proved that wind is also susceptible to freezes.
While the U.S. renewable energy market growth slowed its pace in 2022 due to rising costs and
project delays driven by supply chain disruption, trade policy uncertainty, inflation, increasing interest
rates, and other delays, growth in this emerging sector is likely to accelerate in 2023, according to a
recent report by Deloitte.

In 2023, the sector is expected to see continued growth in new areas, such as offshore wind, clean
hydrogen production and low-income solar programs.

“Overall, as the industry heads into 2023, soaring demand and attractive, long-term incentives are
creating strong tailwinds, but there is still a patch of turbulence to get through,” Deloitte says.