The financial impacts of extreme weather and natural catastrophe events are outpacing the development of mitigation strategies in the North American renewables market, concludes the latest market insights report from GCube Insurance.
In its “North American Nat Cat Update,” GCube reports that market correction hasn’t gone far enough to address the growing severity of natural catastrophe and extreme weather events. A softening of rates could jeopardize the sustainable growth of U.S. wind and solar faced with these evolving risks.
The U.S. renewables market has just experienced its worst summer on record for natural catastrophe claims, with unmodelled extreme weather events proving far more prevalent and damaging than traditional natural catastrophe. In particular, hail losses experienced this year in Texas are projected to reach $300 million — almost 10-times the estimated losses from 2020’s Hurricane Hanna.
While total claims values are still being calculated, multiple instances of losses exceeding sub-limits of up to $50 million, due to extreme weather events like hail, tornadoes and derechos, make clear the need for improved modeling and the more effective use of existing weather data. Solar technologies, for example, have proven particularly vulnerable to hail, exposing weaknesses in the sector’s current standards of impact testing.
Furthermore, speaking at GCube’s annual advisory council meeting in September, leaders from the U.S. renewable energy insurance market highlighted concerns around the “perfect storm” of issues that are exacerbating the total cost of natural catastrophe claims. The supply chain challenge in particular is keenly felt in the U.S. market, with significant financial implications tied to increased downtime and component costs.
“While the increasing frequency of extreme weather and natural catastrophe events is not surprising to us, the rising severity of losses, and the industry’s continued difficulty in managing these risks, is a concerning trend,” commented Fraser McLachlan, CEO of GCube. “The unprecedented growth potential unlocked by the Inflation Reduction Act will count for little if the North American renewables sector is unable to combat extreme weather risks.
“Concerted effort is needed across the value chain to strengthen policies, improve data utilization, and update modeling and testing procedures, and support sustainable growth for the sector,” he continued. “Our latest report issues a clear call for collaboration in the U.S. renewables industry to develop measures to combat the fallout of extreme weather, and support a stable, successful energy transition.”
News item from GCube
Matthew Hermanson says
Like duh.
You build more stuff in front of the storms, of course you are going to have more losses. Even the hurricane forecast center has pointed out that since the mid 70’s they have had 100% coverage of the earth with weather satellites. And thus have been able to measure EVERY hurricane EVERY year since then. The total intensity of all hurricanes added together has had no significant increase or decrease over time. As for the average number of major hurricanes over making landfall in the US for the last approximately 50 years, it has been a slight reduction from the prior 50 years.
So NO, the storms are NOT getting stronger or more common. But since we are building more stuff in front of the storms’ path, the total damage for each storm has been increasing.
The insurance companies’ failure to adequately adjust premiums is a fault in their underwriting process, and in their underwriting process alone.
Solarman says
“The U.S. renewables market has just experienced its worst summer on record for natural catastrophe claims, with unmodelled extreme weather events proving far more prevalent and damaging than traditional natural catastrophe. In particular, hail losses experienced this year in Texas are projected to reach $300 million — almost 10-times the estimated losses from 2020’s Hurricane Hanna.”
For now the insurance companies are struggling to (actuarialize) solar PV installations from home roof systems to thousands of acres solar PV farms around the U.S. and even the World. I have come across some solar PV panels designed for harsh snow load and hail conditions manufactured in the EU and it seems the addition here is a ‘second’ layer of glass that adds robust hail tolerance with about a 6% reduction of efficiency in light capture. My first solar PV system installed on a home in 2005, the solar PV rider on the insurance policy was $10/month more or $120/year. The home I live in now the insurance rate has gone up slightly and it is adjusted towards an increase in property values and construction replacement costs, so it is more difficult to glean what the “baked in cost” of insuring solar PV on one’s roof is as a specific number.