Modern Insurance Magazine Issue 66

tech stakeholders about which risks be transferred to the
insurance industry, and how that risk-sharing balance can
evolve over time as the technology matures, or as more
risks become known or measurable.
Finally, this approach may very well accelerate the
identification of unique, tech-specific insurance needs, all
of which could require product innovation in commercial
insurance markets and even other interventions, such as
government backstops. Knowledge gained across projects
could help expedite the development of risk management
standards, guidelines and codes of practice.
QGiven the complexities and large capital requirements
of climate tech projects, the report highlights that
traditional technology financing mechanisms (such as
growth venture capital funding) are not sufficient at a project
level. In light of this, we’re seeing an increased utilisation of
project finance.
That being said, re/insurers are traditionally contacted after
the project has been designed for development at an approved
site. What are the implications of this?
A
In this case, it often means that insurance-related
considerations are not made during project design,
potentially leading to risks being overlooked or
underestimated. Such oversight could result in insurability
challenges, delays or compromises in financing and
execution.
Engaging re/insurers’ risk engineering teams much earlier
on would ensure that risks are considered, assessed and
managed more holistically, enhancing the insurability of
the project and potentially shortening the due diligence
period for obtaining insurance. For example, extreme
weather events can significantly damage or destroy
industrial assets. Between 2019 and 2023, wildfires, floods
and hailstorms all resulted in major losses for renewable
energy facilities. Rising insurance costs and difficulty
finding coverage are starting to limit where such projects
can be built, particularly where the risk of weather-related
events is above average. With trillions of public- and
private-sector funding being mobilised to expedite the
commercial deployment of new climate technologies
over the coming decades, deciding where and how to
build facilities will be critical to ensuring longevity and
insurability over their life cycle.
Involving re/insurers’ risk engineering teams earlier will
help guide these decisions in those initial stages. Re/
insurers can also work with project developers and their
EPC partners to develop risk management strategies,
such as contingency plans, advanced control systems, and
sensors to anticipate system failures. All of these elements
can be taken into consideration in the design phase,
which enables proactive maintenance once the project is
implemented. Re/insurers can also propose risk mitigation
strategies through selection of equipment, such as the use
of thicker glass or vertical solar panels for solar plants in
zones with high hail risk, which may make a significant
difference to the insurability of the project.
QCan you expand upon the novel Insurability
Readiness Framework (IRF) for advancing the
commercialization of climate technology?
A
The Insurability Readiness Framework (IRF), which
we developed through cross-sector collaboration,
classifies climate tech risks into 7 categories;
technology risk; project information and organisation risk;
legal, finance and compliance risk; physical risk at project
location; business interruption and supply chain risk; longterm
risk; and environmental, social and governance risk.
This framework allows climate tech stakeholders to
consider risks through an insurance lens. The IRF provides
a list of key issues under each category, enabling more
informed conversations between climate tech stakeholders
such as the developers, investors, engineering firms and
re/insurers. In turn, this ensures that risks are considered
and mitigation strategies are developed in line with
insurance expectations.
We also demonstrated how the IRF can be used to
pinpoint areas within climate tech projects that pose
the greatest challenges to insurability. We did this by
using two technologies – carbon storage and green
hydrogen. Finally, utilisation of the IRF during the project
development and financing phases can also help to
identify data requirements on a tech-by-tech basis.
QWhat challenges lie ahead when it comes to
implementing the recommendations in these reports?
Speed and scale! Meeting global climate targets
requires new climate technologies to be developed
A rapidly, and deployed on a huge scale. The insurance
industry has a crucial role to play here, but various
challenges need to be overcome first in order to unlock
full potential.
Firstly, we are lacking practical mechanisms to engage
re/insurers’ risk engineering teams directly with project
developers and other stakeholders from the early pilot
and demonstration stages. Re/insurers’ risk engineering
capacities need to be expanded, and insurance markets
also need to evolve in order to enable the scaled
deployment of climate tech. There must be a greater
understanding of insurance needs for funding climate
tech projects through debt, and capital market financing
needs to be improved. Finally, we must develop our
understanding around how industrial sectors are adopting
these emerging technologies, as well as the implications
for their business models and related insurance needs.
QWhat’s next for Dr. Maryam Golnaraghi?
A
Climate change is increasing the frequency and
severity of extreme weather events. Our next
project will assess the insurability of physical
climate risks in light of this trend, and examine what’s
needed to keep insurance affordable and available. This is
a huge and rising concern in many countries with mature
insurance markets, where in the absence of appropriate
risk reduction and prevention measures such as land
zoning, upgrading building codes and retrofitting existing
buildings, insurance companies have been forced to limit
or cease their offering of new policies. The project will
bring focus to the need for a paradigm shift in the way
society manages these risks.
Dr. Maryam Golnaraghi
Director - Climate Change and Environment,
The Geneva Association
MODERN INSURANCE | 65