As the adoption of renewable energy accelerates globally, insurers are being forced to rethink how they assess, price and manage risk for a new generation of assets.
The International Energy Agency predicts that global renewable energy capacity will double between 2025 and 2030, and South Africa plans to increase the share of renewable energy in its electricity mix from 11% to 41% by the end of this decade.
This rapid expansion has exposed gaps in traditional insurance models and increased reliance on insurtech, data analytics, and emerging technologies to manage the increasingly complex risks of renewable energy.
Insurtech meets renewable energy
According to Mershalene Maharaj, underwriting governance specialist at Santam Specialist Solutions, the convergence of insurtech and green energy is key to managing these risks. “Both sectors are driven by data-driven innovation,” she explains. “While green energy introduces new risk categories such as solar, wind and battery storage, insurtech provides digital tools to model, monitor and mitigate those risks using AI, IoT and blockchain.
“Combined, these will enable sustainable growth with smarter insurance solutions, making renewable projects more bankable and attractive to investors,” Maharaj added.
Emerging markets stand to benefit greatly from this shift, as renewable energy development often struggles to attract capital due to limited risk perception and historical loss data.
Maharaj believes technology can bridge this gap. “Insurtech can support financial inclusion in ways that reduce uncertainty through predictive analytics, enable microinsurance and parametric products for small-scale renewable projects, and accelerate energy access,” she says.
However, the underlying risks remain complex. Solar power plants face hail, storm damage, and inverter failure. Wind turbines face mechanical failures and lightning strikes. And grid-scale batteries come with risks of fire and explosion related to thermal runaway.
“These exposures are difficult to guarantee because they are high-severity, low-frequency events, and because the components are interdependent, a single failure can ripple throughout the system,” Maharaj says.
Managing risks in Africa
African developers face some additional risks compared to more developed markets. Gaps in infrastructure increase vulnerability to theft and vandalism, while extreme weather fluctuations impact the performance of solar, hydro and wind power. Limited firefighting resources also complicate battery incidents, and political and regulatory uncertainties add further complexity.
To address these evolving risks, insurers are building new risk models tailored to renewable technologies. Sensors linked to IoT provide continuous operational data, and scenario modeling helps assess battery degradation and fire potential.
“AI-based maintenance can help identify stress points early and reduce uncertainty before failure occurs. This is a huge step forward in improving insurance,” says Maharaj. “Continuous monitoring transforms insurance from being reactive to being proactive. It can not only resolve losses but also prevent them. This reduces catastrophic losses and contributes to improving project bankability and sustainability.”
This is a huge opportunity for insurance companies. Currently, renewable energy insurance accounts for less than 30% of the size of the fossil fuel insurance market. The Swiss Re Institute estimates that if countries meet their renewable energy targets, global renewable energy insurance premiums will exceed $237 billion by 2035, compared to $22 billion in oil, gas and coal insurance premiums paid in 2022.
Maharaj concludes that the future of energy insurance will be defined by technology-enabled risk insights and close stakeholder partnerships. “As renewable infrastructure becomes more complex and climate risks increase, insurtech provides us with the tools to support resilience, protect capital and enable the energy transition in a sustainable way,” she says.
The views expressed and market forecasts referenced are based on external sources and industry trends. They should not be construed as guarantees or financial promises by Santam.
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