Alternative Energy

Renewable Energy Comes of Age

No longer a niche market, loss histories for renewable energy are reworking how green is insured.
By: | November 8, 2016 • 6 min read

Renewable energy can no longer be called alternative energy, now that wind and solar electricity are providing large percentages of total power in several North American wholesale markets.


As a result, underwriters and brokers who serve green power producers have enjoyed growth, but have also been vexed by what can best be described as the challenges of an adolescent industry.

For example, when wind farms and solar arrays first began to grow in the middle 2000s, carriers made their best guesses in underwriting because there was a lack of historical loss and performance data.

Going on a decade later, there is plentiful data, but prevailing softness in the market limits what underwriters can do with it.

“The early wind farms in particular are going on eight years old, and we are starting to see failures beyond what was anticipated,” said Geraldine Kerrigan, managing director at Beecher Carlson.

The frustration, she said, is “there is a now a rich volume of loss data, but because there is so much [underwriting] capacity the market is very soft. Carriers’ hands are tied in underwriting trying to tighten terms and conditions. It is probably one of the few industries where you just can’t use trend data.”

After a shotgun start in the previous decade with many operators and investors trying a variety of generating options, some clear business models have emerged. This has also proved to be a mixed blessing for insurers.

Drivers of Solar Power

“Solar is more attractive to investors because that usually involves multiple smaller sites,” Kerrigan said. “That presents more of a challenge for underwriters. It is more of an administrative burden and a lower profitability profile from an insurance perspective.”

Geraldine Kerrigan, managing director, Beecher Carlson

Geraldine Kerrigan, managing director, Beecher Carlson

One important driver of growth in solar has been the rise of aggregators. Those companies will tie together several developments, their own or others’, and secure a single power-purchase agreement (PPA) from a utility.

That fosters the development of solar power as a viable commercial operation, but vastly complicates insurance and risk management, especially when the aggregator may lease actual assets or just space on a roof.

Similarly, insurers underwriting wind energy are grappling with higher-than-anticipated losses in equipment. They are also having to get vertical in a hurry as first-generation battery arrays are now being designed into second-generation wind farms, and being retrofitted into first-generation wind farms.

“Solar is more attractive to investors because that usually involves multiple smaller sites.” — Geraldine Kerrigan, managing director, Beecher Carlson.

“Lithium battery technology has reached the point that it is viable [commercially and operationally] to be a benefit to wind generation,” said Kerrigan. “Carriers are writing the new batteries, but they are not entirely happy about it.”

In effect, they are back to square one having to make underwriting decisions with little performance, loss or operations history.

Renewable Energy Surging

Despite the growing pains, renewable energy is now off the porch and running with the big dogs. In September, the Sabine Center for Climate Change Law at Columbia University in New York held a seminar on energy markets including coal, natural gas and renewables with a focus on regulation, and global supply and demand.

At that seminar, Anthony Yuen, director of global energy strategies at Citi Research, presented findings that renewables have grown from about 40 gigawatts in 2001 to about 75 GW today, and are expected to pass nuclear power — flat at about 100 GW — in about 2025.

Meanwhile, coal has fallen from about 230 GW in 2001 to 150 GW today. Citi’s projections show renewables catching a falling coal at about 120 GM by 2030 (see chart).

“The surge in both wind and solar against no increase in overall demand has definitely put the squeeze on both coal and gas.” — Anthony Yuen, director of global energy strategies, Citi Research.

“The surge in both wind and solar against no increase in overall demand has definitely put the squeeze on both coal and gas,” said Yuen.

Several other presenters supported the outlook that the gains in gas-fired generation at the expense of coal has mostly played out, and that as coal use declines further, the beneficiary is expected to be renewables.


David Schlissel, director of resource planning analysis at the Institute for Energy Economics and Financial Analysis, said that wind provided 32 percent of the energy in the northern region of the Midcontinent Independent System Operator (MISO) in the seven months from October 2015 through April 2016.

The high point was 42 percent of the energy in April 2016. MISO covers all of Manitoba, Minnesota, Wisconsin and south to Arkansas and Louisiana.

Schlissel also reported that 48 percent of the system load in the Southwest Power Pool (South Dakota, Nebraska, Kansas, and Oklahoma) was served by wind on April 5. Also, 48 percent of the load in the Electric Reliability Council of Texas was served by wind on March 23, and 45 percent on Feb. 18.

Coverage Matures

As renewable power has gained maturity, so has insurance. “There are new types of coverage that were not available as recently as just a few years ago,” said Charles Long, area senior vice president at Arthur J. Gallagher & Co.

“Questions about gaps in coverage and what exposures to retain or transfer are happening in the early stages of a PPA,” he said. “We have seen some standardization in forms, but that is also a result of standardization in equipment.

“The industry has settled on a handful of key suppliers so when we go to market for a placement those components are well known.”

One of the insights gained from operational and loss history is a pattern in claims.

“Incidents with wind turbines are low in years 1, 2 and 3, then there is a spike in years 4 through 8, then a huge drop in claims years 9 to 12, and then an increase again year 13 and out,” Long said.

He stressed that operators and underwriters are still examining the newly emerging patterns to mitigate those losses.

Another interesting development has been the relative rarity of natural catastrophe claims.

Jatin Sharma, head of business development, GCube Insurance Services

Jatin Sharma, head of business development, GCube Insurance Services

“When wind generators first sought markets, they went to the Nat CAT carriers because they had the wind models,” Long said. “With wind power you want lots of wind, but not too much.

The Nat CAT covers were designed for low occurrence, but high loss. What we have seen in practice is higher occurrence of smaller losses. Gear box wear, blade issues — cracks, separation, bird strikes, even being shot — fires, even tower collapses. The least frequency has been Nat CAT.”

That creates a bit of a dilemma for underwriters, said Jatin Sharma, head of business development at specialist renewable energy underwriter GCube Insurance Services.

“Generators have achieved savings by doing their own operations and maintenance, and moved away from relying on manufacturers for that. The insurance sector has been naïve about operators doing their own maintenance.

“It is very different having a utility do its own, versus having it done by the manufacturer who knows the unit and maintains hundreds of them.”

As a result, carriers that are geared for CAT-scale losses have suffered instead from a thousand cuts.

“There are some underwriters seeing claims for just $100,000 to $300,000, but a lot of them,” said Sharma. “To handle that frequency and volume you have to have a claims team built for it.


“At the same time, I sympathize with the risk managers. Buyers are coming out of a utility mind-set, likely mutuals, and are setting low deductibles to satisfy lenders or joint-venture partners. Risk managers’ staffs have been reduced despite the fact that they are managing a different risk profile than what they are used to. That makes them heavily reliant on brokers.”

GCube announced in October that it now provides coverage for more than 4GW of wind assets in Canada. As of last year, and following the installation of 36 new wind energy projects, Canada is seventh in the world in terms of total installed capacity.

At just under 12 GW, wind energy currently caters for approximately 5 percent of Canada’s electricity demands. However, the country has a long-term aim to reach a capacity of 55 GW by 2025, accounting for 20 percent of its total energy needs.

Gregory DL Morris is an independent business journalist based in New York with 25 years’ experience in industry, energy, finance and transportation. He can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Janet Sheiner, VP of risk management and real estate at AMN Healthcare Services Inc., sees innovation as an answer to fast-evolving and emerging risks.
By: | March 5, 2018 • 4 min read

R&I: What was your first job?

As a kid, bagging groceries. My first job out of school, part-time temp secretary.

R&I: How did you come to work in risk management?

Risk management picks you; you don’t necessarily pick it. I came into it from a regulatory compliance angle. There’s a natural evolution because a lot of your compliance activities also have the effect of managing your risk.

R&I: What is the risk management community doing right?


There’s much benefit to grounding strategic planning in an ERM framework. That’s a great innovation in the industry, to have more emphasis on ERM. I also think that risk management thought leaders are casting themselves more as enablers of business, not deterrents, a move in the right direction.

R&I: What could the risk management community be doing a better job of?

Justified or not, risk management functions are often viewed as the “Department of No.” We’ve worked hard to cultivate a reputation as the “Department of Maybe,” so partners across the organization see us as business enablers. That reputation has meant entertaining some pretty crazy ideas, but our willingness to try and find a way to “yes” tempered with good risk management has made all the difference.

Janet Sheiner, VP, Risk Management & Real Estate, AMN Healthcare Services Inc.

R&I: What was the best location and year for the RIMS conference and why?

San Diego, of course!  America’s Finest City has the infrastructure, Convention Center, hotels, airport and public transportation — plus you can’t beat our great weather! The restaurant scene is great, not to mention those beautiful coastal views.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

The emergence of risk management as a distinct profession, with four-year degree programs and specific academic curriculum. Now I have people on my team who say their goal is to be a risk manager. I said before that risk management picks you, but we’re getting to a point where people pick it.

R&I: What emerging commercial risk most concerns you?


The commercial insurance market’s ability to innovate to meet customer demand. Businesses need to innovate to stay relevant, and the commercial market needs to innovate with us.  Carriers have to be willing to take on more risk and potentially take a loss to meet the unique and evolving risks companies are facing.

R&I: Of which insurance carrier do you have the highest opinion?

Beazley. They have been an outstanding partner to AMN. They are responsive, flexible and reasonable.  They have evolved with us. They have an appreciation for risk management practices we’ve organically woven into our business, and by extension, this makes them more comfortable with taking on new risks with us.

R&I: Are you optimistic or pessimistic about the U.S. health care industry and why?

I am very optimistic about the health care industry. We have an aging population with burgeoning health care needs, coupled with a decreasing supply of health care providers — that means we have to get smarter about how we manage health care. There’s a lot of opportunity for thought leaders to fill that gap.

R&I: Who is your mentor and why?

Professionally, AMN Healthcare General Counsel, Denise Jackson, has enabled me to do the best work I’ve ever done, and better than I thought I could do.  Personally, my husband Andrew, a second-grade teacher, who has a way of putting things into a human perspective.

R&I: What have you accomplished that you are proudest of?

In my early 20s, I set a goal for the “corner office.” I achieved that when I became vice president.  I received a ‘Values in Practice’ award for trust at AMN. The nomination came from team members I work with every day, and I was incredibly humbled and honored.

R&I: What is your favorite book or movie?

The noir genre, so anything by Raymond Chandler in books. For movies,  “Double Indemnity,” the 1944 Billy Wilder classic, with insurance at the heart of it!

R&I: What is your favorite drink?


Clean water. Check out for how to help people enjoy clean, safe water.

R&I: What’s the best restaurant at which you’ve eaten?

Liqun Roast Duck Restaurant in Beijing.

R&I: What is the most unusual/interesting place you have ever visited?

China. See favorite restaurant above. This restaurant had been open for 100 years in that location. It didn’t exactly have an “A” rating, and it was probably not a place most risk managers would go to.

R&I: What is the riskiest activity you ever engaged in?

Eating that duck at Liqun!

R&I: If the world has a modern hero, who is it and why?

Dr. Seuss who, in response to a 1954 report in Life magazine, worked to reduce illiteracy among school children by making children’s books more interesting. His work continues to educate and entertain children worldwide.

R&I: What do your friends and family think you do?

They’re not really sure!

Katie Dwyer is an associate editor at Risk & Insurance®. She can be reached at [email protected]