Competitive pricing ahead for power insurance sector as major losses decline: WTW

The absence of larger losses in 2023 and 2024 is expected to lead to more competitive pricing in property and business interruption, while lower-level attritional losses will remain a constant, according to WTW’s Power Market Review.

In the international liability market, a slight increase in capacity and softer market conditions have led to intensified competition. This has resulted in downward pressure on rates, contributing to market stabilisation, the report also noted.

According to WTW, with the exponential growth of global electrification, demands on the power sector are gathering momentum, resulting in the lifespans of power assets being extended in order to keep up.

To accommodate for ageing assets, analysts stated that companies will need to provide (re)insurers with a maintenance strategy that includes clear modifications.

Moreover, there is increasing demand for environmentally-conscious investment portfolios in the liability sector. However, emerging technologies carry inherent risks, as the distinction between established and untested technologies persists.

An increasing reliance on intermittent, weather-dependent sources of power is demanding more flexible grids and optimisation of operating systems.

The report also found that transmission system operators (TSOs) are being challenged by transition as the existing centralised and large-scale power grid shifts to a solar, wind, and hydroelectric heavy power grid.

Analysts worry about the increased potential for transmission bottlenecks, with generation assets now located further from load centres and in new regions with limited transmission infrastructure.

Coal and/or wildfire-exposed investments are facing increased scrutiny, particularly those with significant US exposure. Thermal energy remains central to the base load supply strategy for most regions.

Rupert Mackenzie, head of global natural resources, WTW, said: “Making strides in a softening market will demand renewed focus on getting valuations right, investing in risk engineering for ageing assets, and managing supply chain volatility through contingency plans.

“(Re)insurers will need to lean into power companies’ specialist knowledge of operations and technologies to really understand their risks and find solutions that are commercially reasonable.”

Mackenzie concluded: “Power companies are encouraged to present their risks with transparency, to help (re)insurance markets understand the technologies and risk controls to right-size the cover.

“With the market approaching a new phase, the value of getting this approach right is essential to take full advantage of opportunities. The better the market understands the client’s business, the more accurate and flexible the solutions can be.”

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