Businesses know the green transformation is well underway, and they are preparing in the best way possible: by working with their environmental insurance partners to get ahead of risk and keep informed.

“Green transformation” is more than a climate shift or weather patterns; it’s a social transference to more environmentally sustainable energy solutions like solar, wind and geothermal sources.

“As companies invest in green transformation, and begin shifting their business models away from exclusive investment, use, or support of traditional energy sources like petroleum and coal, they are starting to look at the alternative energy space,” said Jamie Langes, Vice President of Environmental Underwriting for Philadelphia Insurance Companies (PHLY).

“Insurance can champion this repositioning by supplying financial support needed to companies engaged in green transformation through policies and programs.”

This is a promising growth area for environmental insurers and their clients—one that insurers are increasingly willing to support and help free up capital. Here’s a deeper look at businesses’ interest in green transformation, the potential underwriting challenges of alternative energy solutions and the grounds for a good partnership.

A Bigger Interest in Green Transformation

Jamie Langes, Vice President of Environmental Underwriting, Philadelphia Insurance Companies

There are plenty of reasons why companies are looking at green and alternative energy solutions. Sustainability is a big reason, as is the profit motive.

Insurance companies are looking at this shift with interest, with some carriers even reducing support for traditional energy sources to help bolster investment opportunities in green energy.

“In the insurance sphere as a whole, carriers are actively engaged in identifying strategies to deploy their capacity, and making conscious determinations regarding coverage offerings that as a marketplace, we have committed to allot to green transformation,” Langes said of carrier interest.

Green energy is important for businesses’ future as it provides a renewable source of energy. As interest turns toward utilizing the big three—solar, wind and geothermal—so too does the financial support to sustain these endeavors.

“The more companies dive into green transformation, and the more insurers support those operations fiscally, we’re projecting this could easily set a market pace in the billions in a very short time,” Langes said.

How Insurance Supports Green Transformation

Venturing into green energy should not be done lightly; that’s why it’s important to work with an environmental underwriting team that has its finger on the pulse of green transformation.

Businesses looking into alternative energy require support from the insurance marketplace in order to secure adequate liability transfer, as well as limit rising risks. Insurance plays its role by supplying financial support to these companies engaged in green transformation to be able to function.

“Insurance capacity is growing, and rate is supporting new ventures from a balance of coverage and premium,” Langes said.

Insurance further provides a risk management perspective that helps sustain start-up costs and exposures for liability. Having the backing of an experienced underwriting team can be the difference between sound risk management and coverage and failure to launch.

“Green transformation is being leveraged as one component of our environmental approach,” said Langes, “and with [PHLY’s] expertise and experience, that approach is finding new ways to do business—including collaboration and a long-term vision, which embraces our role as a financial vehicle for progressing and assisting green transformation and technology through insurance.”

Traditional and Alternative: An Important Underwriting Balance

There is one thing that a good underwriting team must also review when aiding clients in their green transformation: Underwriting for traditional energy sources has the benefit of historical data to help guide decision-making.

“The insurance marketplace has ample actuarial data to gauge pricing parameters and risk acceptance vehicles from insuring traditional sources of energy long-term.  As a result, insurers understand how to write that risk explicitly to make sure they’re able to not only support the business but also have the profitability to support their insureds should there be a claims situation,” Langes explained.

In contrast, “Green energy and design risks don’t have that much value proposition data yet since these exposures are still relatively new in the insurance marketplace as an insurable risk.”

To fully bring about green alternatives, underwriters must lean into this transitional period with a pulse on both sides of the energy aisle. It will take additional considerations during the process, including a review of rates, coverage options and availability, and detailed terms and conditions to best service green transformation companies.

“The businesses have to coexist. Existing traditional energy sourcing companies that are investing in green solar, wind or geothermal will still have their original exposures; just less over time,” Langes said.

“The underwriting challenge, therefore, is that we must underwrite the two dichotomies, green transformation along with traditional, as companies transition forward.”

Environmental Underwriting Experts at Your Service

Insurance is a partnership forged by the insurer’s deep understanding of the insured’s risk management needs. At PHLY, the team is dedicated to better understanding its client partners’ businesses inside and out.

Companies looking to join the green transformation can rest easy knowing that the environmental underwriting team at PHLY applies this same level of understanding.

“We’re proactive in our approach, more than reactive,” Langes continued. “This means that what’s next, what’s new, what our insureds’ needs are, remains at the forefront of our decision making. Investing in green transformation is a fairly new endeavor for many insurance companies, but we, at PHLY, have the advantage that we’re always willing to be engaged in the evolving conversation.”

“We are integrating green transformation options into our coverage positions, investing in these initiatives as we would for any operation,” Langes said.

As part of Tokio Marine Group, its parent company, PHLY can further leverage the insurance experts within the umbrella to evaluate, at the highest level, the societal changes and community interest in green transformation and what clients are looking for from their financial insurance partners.

Further, PHLY has built an environmental underwriting team with tenured experience in the marketplace. But it’s more than that: “We not only have the experience but also the expertise,” said Langes. “Many of our underwriters come from the consulting field, so they also understand the technical aspects of sustainable energy solutions. We leverage that into collaboration, and towards being a resource for brokers to help them support their clients for insurance. Tokio Marine and PHLY bring all of that expertise to the table on products and service.”

This dedication to green transformation has enabled PHLY to have competitive and tailored coverage. Underwriters are paying close attention to companies transitioning to alternative energy solutions, as well as looking at related fields to constantly and consistently remain in the know.

To learn more, visit: https://www.phly.com/ESdivision/es-environmental.aspx

This article was produced by the R&I Brand Studio, a unit of the advertising department of Risk & Insurance, in collaboration with Philadelphia Insurance Companies. The editorial staff of Risk & Insurance had no role in its preparation.