The insurance industry could help provide key support to the development of renewable energy solutions and mitigate climate change.
In a new report ‘Building a sustainable energy future: risks and opportunities’, reinsurance firm Swiss Re has highlighted the important role insurers must play in providing “new growth opportunities” for the renewables industry.
Under Swiss Re’s best case scenario, renewable energy would make up 92% of the global energy by 2050, which would cap the global temperature increases at 3°C. However, the report stresses this would require “global policy consensus, relatively stable economic conditions and strong public support for the replacement of fossil fuel technologies with low carbon energy sources”.
The report predicts total annual losses in the energy sector could reach $42 million (£26.5m) by 2020, leaving way for insurers to provide financial protection as well as risk management expertise to help avoid these losses in the first place.
Agostino Galvagni, CEO at Swiss Re Corporate Solutions said: “Insurers should support the further development of low carbon-intensive power production. They need to be innovative and provide solutions along the whole value chain. For example, insurers can enable a project financing through construction insurance and reduce cash flow volatility of intermittent energy production to read the risk transfer solutions.”
It suggests the “changing energy landscape” would provide new growth opportunities for insurers, with the Asia-Pacific region expected to drive growth in the energy sector and account for 50% of the total annual global energy financing by 2030.
According to figures from the International Energy Agency (IEA) global investment of around $38 trillion (£24tn) is needed to build and maintain an adequate energy supply infrastructure over the next 25 years, with the world energy demand predicted to rise by 40% between now and 2035.