Energy Answers Blowing in The Wind
Offshore wind farms are an increasingly important source of energy in Europe and capacity is expected to increase tenfold by the end of the decade. That translates into around 8,000 wind turbines in the sea.
In terms of investment, the expansion will require around EUR75 billion up to the year 2020. Of course investors will be reluctant to put capital at risk unless comprehensive insurance protection is in place to protect these hi-tech assets. So for insurers, the wind energy market represents a big opportunity. We think that the sector will produce premium volumes up to EUR1 billion for installation and operational insurance covers by the end of the decade.
These projects present big challenges. Wind farms will be increasingly erected deep into the North Sea, in depths of up to 50m, exposed to weather, waves and salt water. Property and engineering insurers covering the installation and operation of what is a relatively new technology will need considerable technical expertise.
But investors seek not only cover for physical losses they also want to have coverage against possible financial losses caused by delays in the installation, or interruptions to their operation. The insured values for an offshore wind farm are huge: often more than EUR 1 billion – and that’s before adding hundreds of millions for the Business Interruption covers. Accumulation exposures are especially problematic, though reinsurers can help to some extent in this regard.
For more on offshore wind energy risks in Europe, read our article published in our Topics No. 19 publication.