Emerging risks | Growth Opportunities | APAC Insurance
Emerging risks | Growth opportunities | APAC insurance
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The ASEAN reinsurance pool was set up to fix a market that wasn’t working to its full potential: regional insurers were unable to keep up with the tremendous investment in renewable energy while global players are growing increasingly uneasy about the underwriting dangers that the sector presents.
Similar pools could be used to plug capacity gaps elsewhere in Asia, too, but this is likely to be on a more localised basis.
“A one-size-fits-all approach for a pool generally does not lead to long-term success,” says Terence Tang, Underwriting Manager, Engineering for Greater China, South East Asia and Korea at HDI Global. “What might be more beneficial is a pool with a targeted approach – for example, hail for solar farms, cyclone cover for prone areas. Something that specifically addresses a key challenge for the market as a whole.”
So, while a wholesale failure of the renewable (re)insurance industry seems unlikely, a pool structure could help bring in fresh capacity for certain hard-to-underwrite risks.
Horne from Clyde & Co says that one such area could be the underwriting of hydrogen facilities in Australia – a segment of the renewables market that the Albanese government is pushing quite hard as part of its underwriting pledge.
“The mishandling of hydrogen can cause a potentially catastrophic event so there is greater concern from liability underwriters in particular about the technology and risks associated with it,” says Horne. “If the Australian government continue down the road of backing hydrogen, careful consideration would need to be given as to whether there is sufficient appetite from (re)insurance markets to underwrite such risks on a broader scale.”
Another area that could benefit from pools is emerging offshore wind farms. Offshore installations are often more complex to underwrite than onshore ones since repairs typically require ships to be available.
While the vast majority of Australia’s renewable energy production is onshore, and is likely to continue to be, Canberra has recently awarded a small number of licences for offshore windfarms off the coast of Victoria.
Beyond ASEAN and Australia, many other renewable energy markets in APAC could also derive benefit from some kind of pooled insurance mechanism.