Wednesday, July 24, 2024

Membership options

Renewables sector embracing cell captive solutions

There has been a rise in the utilisation of protected cells in the renewables market due to the accessibility for smaller players and a challenging market environment.

As with many in the commercial market, the renewables sector has faced pricing and coverage challenges despite a rising appetitie from (re)insurers to underwrite the associated risks.

“There has definitely been an uptick in the use of protected cells, particularly given it’s a much easier entry point for many of the smaller players, as they can get involved and share some of that expense, while still getting the bulk of the benefit,” Michael Kolodner, global renewable energy & US power leader at Marsh, told Captive Intelligence.

“There’s a lot of existing single parent captives at the high end of the maturity scale. There are also a number of group captives that already existed.”

Energy Insurance Services (EIS) owns and manages a sponsored captive in South Carolina which members of Energy Insurance Mutual (EIM) can access.

Megan Ogden, chief operating officer of EIS, said in an upcomoing Global Captive Podcast episode that they were increasingly seeing renewable projects and infrastructure insured by their members using the cell facility.

“We have seen a big upswing in coverage for renewable projects in the last 12 months in EIS,” Ogden said.

“There are several risks factors including construction risks, regulatory risks, technological risks, operational risks and environmental risks that are participants need to address.

“While the commercial market is currently offering a more consistent approach to renewables in both capacity and pricing, a captive or cell is a very valuable alternative risk management and financing tool.”

Kolodner highlighted how captives are particularly useful in the renewables market as there is a high amount of dismemberment and specification within the class.

“If you are an oil and gas major, the marketplace for your risk is different than if you are an independent developer simply looking for insurance for a solar facility,” he said.

“So, the market is segmented and specialised, and renewables can be a hyper specialisation within the broader space, or it can be just another asset.

“And this is where captives actually help bridge this gap quite significantly.”

The most mature players in the renewables market are ultimately using their captives to control the different market access challenges.

Kolodner added: “So, if you run everything into your captive and then you approach the market, on a wholesale basis, you’ve got the ability to go with a more diversified portfolio than if you’re bringing individual projects to the market to the renewables only market in a particular region.”

Captive Intelligence will be publishing a Long Read on captives in the renewables sector on Thursday, 16 February.