Insurance Insights : Supporting the Energy Transition: How Insurance Rises to the Renewable Challenge

Vanesa Herrero, CEO – Tokio Marine Europe

I’ve been working in the insurance market for nearly 25 years, the last six of which I have been lucky enough to be embedded in the Luxembourg market, and over that time, I have seen a huge range of risks across various different lines of insurance. As the CEO of Tokio Marine Europe, I now have a much broader view of how all these business lines and the hazards they are designed to protect against, intersect, influence and rely upon each other.

In Luxembourg, the ambitious national targets set in the Integrated National Energy and Climate Plan (NECP) to reduce greenhouse gas emissions by 55%, raise the share of renewable energies to 37% and increase energy efficiency by 42% by 2030 – and climate neutrality by 2025 – require the adoption of government regulations, financing programmes and engineering projects, among other numerous efforts in diverse sectors of society.

The renewable energy measures presented in May 2025, show that the public administration is determined to consolidate Luxembourg’s increased energy independence and resilience, as well as contribute to reaching their renewables targets. Fast-tracked permitting, simplified administrative processes, enhanced financial assistance and subsidies will certainly help get new projects off the ground.

However, these headlines don’t tell the full story. Behind the progress lie structural, financial and climatic challenges that threaten the momentum of the green revolution. From my vantage point, it’s clear that insurance has a pivotal role to play in navigating those challenges and ensuring the transition doesn’t stall.

Understanding renewable energy insurance

Renewable energy insurance is a specialist line that supports the development, construction and operation of clean energy projects – from onshore and offshore wind and solar farms to hydrogen infrastructure and carbon capture projects. It covers a wide array of risks, including property damage, business interruption, construction defects, liability issues and, increasingly, losses from natural catastrophes.

What makes this line particularly complex is the evolving risk landscape it inhabits. Unlike more mature industrial sectors, renewable energy projects are exposed to both traditional operational hazards and newer, climate-related threats. They also frequently rely on novel technologies and business models, creating an underwriting environment where actuarial data can lag behind real-world developments. In short, we’re insuring assets in real time within a rapidly changing physical, regulatory and financial landscape.

The market’s unique challenges

Unlike conventional energy infrastructure, renewable energy projects are often decentralised, exposed and experimental, and that combination creates a distinctly volatile risk profile.

Historically, the US market has been the epicentre of natural catastrophe-related renewable losses with wildfires, hurricanes and hailstorms resulting in hundreds of millions of dollars in damages. Now, that risk is very much global. Europe, which was once perceived as relatively benign, has seen a sharp rise in climate-driven losses. In 2024 alone, we witnessed the second-costliest year for flood damages and significant impacts from windstorms, hail and extreme rainfall across major renewable projects.

Some insurers have paid millions in claims – for instance, one specialist renewables carrier has paid out over $1bn in the last 25 years – and are still committed to providing capacity, while evolving risk perceptions elsewhere in the market have resulted in more selective capacity for certain risks or regions, increased pricing and the use of deductibles.

There is significant appetite for better understood risks such as onshore wind and solar, however, capacity may be more limited for the lesser understood risks for larger wind turbines, floating wind and solar installations, and hydrogen projects. Cover for these industry types is very specialist and there are only a few markets prepared to offer lead terms.

This creates a major issue as renewable projects often depend on long-term financing and lenders need confidence to provide that finance. Much of that confidence depends on the presence of quality insurance. If capacity becomes volatile, uncertainty enters the equation and the risk of projects stalling increases. If we as an industry allow that to happen at scale, the global energy transition will slow just when it needs to be accelerating.

Innovation and commitment must match risk

It’s worth remembering that insurance has always been central to progress. From the industrial revolution to the rise of global trade, we’ve provided the confidence that others need to take calculated risks and, hopefully, reap the rewards. Our role in the energy transition should be no different.

But the industry needs to adapt to fill that role effectively. We must develop better tools to model and understand climate risk. We must be more agile in our product development and faster to market solutions that meet emerging needs – whether that’s parametric products for extreme weather or cover for novel technologies like battery storage and hydrogen electrolysis.

Specialist insurance and risk management solutions for businesses looking to decarbonise their operations are already available on the market. Complete, global solutions combining expertise in renewable energy with marine and offshore capabilities, traditional property and casualty cover, construction risk transfer, and even more bespoke services like tax credit insurance, are especially beneficial to clients looking for a comprehensive risk management strategy in their green transition journey.

These new renewables propositions aim to help reduce volatility and support market stability. Too often, the lack of cost-effective, globally consistent cover is a barrier to progress. These initiatives mitigate that by embedding underwriting consistency and ensuring that cover is both available and relevant to the technologies of today and tomorrow. Luxembourg’s position as a promising centre for sustainable finance combined with a strong global insurer presence offers good prospects to provide green energy projects with comprehensive, sophisticated insurance solutions.

Insight from the Expert

For those considering a career in this space as an underwriter, claims professional, risk engineer or broker, my advice is simple – be curious and stay agile.

Renewable energy insurance isn’t just about understanding risk in the conventional sense. It’s about marrying technical insurance knowledge with a working understanding of clean energy technologies, global climate patterns and the capital markets that finance these projects. You’ll need to keep pace with innovation, collaborate across disciplines and, above all, maintain a mindset that embraces change.

It’s a challenging field, but one with enormous purpose. Every turbine turning in the wind, every solar panel installed and every green hydrogen facility built only happens because someone had the foresight to insure it, which puts our industry in a position of great power as well as significant responsibility.

The road ahead

The renewable energy insurance market currently issues around $3 billion in capacity and that is expected to more than triple by 2030. But that growth is not guaranteed and insurers must do more than provide capacity. We must bring forward innovation, offer clarity and ensure that the products we develop are as dynamic as the market we serve.

We also have to work together as a community. Clients often tell us that accessing the full range of expertise and cover they need is overly complex. We must simplify, which means more collaboration within the insurance industry and a greater focus on transparency and consistency.

Insurance has supported every major social and economic innovation over the last 350 years. If we can bring that same boldness and clarity of purpose to the renewable energy space, I’m confident we’ll be looking back in years to come and say we played a crucial role in the global energy transition.

This isn’t just a political or environmental imperative – it’s one of the largest economic transformations in human history, and our role as insurers is to provide the certainty, stability and creativity it demands. We should be proud to step up to meet those demands.