In this Q&A with Sam Walsh, Head of US Renewable Energy at AXIS, we look into the specific challenges insurance companies are facing, the ways in which they are adapting to meet these challenges, and the impact this is having on the growth of the renewable energy industry. Additionally, we will look at the efforts that companies like AXIS are making to improve their understanding and management of risk in this rapidly-evolving sector.
Where are you seeing growth in the US renewables sector?
We are seeing growth across the sector as consumer demand for greener power production drives investment in renewable energy projects. The offshore wind market in the US is still young but we’re starting to see the development of a supply chain that will allow it to grow over the next few years. When it comes to onshore renewables, battery storage projects are coming online at their fastest pace yet, however the major areas of growth remain in new wind and solar projects.
What is driving that growth?
Individual lessons in the renewables industry need to become shared ones to improve ability to manage and mitigate risk.

There are a number of different factors driving growth, but the main driver is a reduction in the cost of installation. While the past two years have seen price spikes from inflation and supply chain issues, over the last decade or so we have seen a huge decrease in the cost of generating electricity from wind and solar. We’re beginning to see the same in battery storage as economies of scale start to take hold. In the wind industry there has also been a transition to larger wind turbines. Over the past 12 years we’ve seen onshore turbines move from an average of 1-2 megawatts (MW) per unit to around 4-6 MW, while offshore turbines are now in the 12-14MW range. In the solar industry, a notable increase in the number of solar modules produced has led to greater and greater economies of scale. In both cases this has allowed for a cheaper price per MW of energy produced allowing renewables to be cost competitive, if not cheaper, than traditional power generation.
What is AXIS doing to improve its renewable energy business?
We continue to invest in the people and technical skills within our team to ensure we keep providing specialist, tailored insurance products and services that not only meet the needs of our customers and brokers today, but also anticipate the direction of this fast-moving industry in the years to come. Changing technology, new government incentives, a fluctuating socioeconomic landscape with climate change as the backdrop are integral elements of the renewable energy industry, which insurers need to simultaneously address, adapt to, and provide solutions for.
We have a global team of highly experienced underwriting and claims specialists, however, as technology changes particularly with onshore wind, battery storage and the potential in offshore wind, we need to continue to strengthen our technical understanding of these projects. In the last few years we’ve added technical engineering capabilities, embedding a deeper understanding within our team of new technology as it emerges. Beyond bringing that expertise internally, the whole renewable energy industry can improve through further collaboration between different stakeholders. All too often the lessons related to losses or equipment failures or weather events are learned individually. If the renewables industry is to continue to meet its potential, individual lessons need to become shared ones to accelerate the way we all adapt and grow from prior mistakes or failings and, in turn, improve our ability to collectively manage and mitigate risk.
How has the renewable energy sector been impacted by severe weather? How is the industry responding in terms of underwriting/risk mitigation?
Severe weather continues to have an increasing impact on renewable energy projects. While traditional catastrophic perils such as hurricanes have caused significant losses across the US, the majority of claims in recent years have come from secondary perils such as wildfire and convective storms. Unlike earthquakes or hurricanes, high-risk secondary perils are more geographically spread out and we have seen an increase in both frequency and severity in recent years. California, Oregon and Colorado have experienced some of their costliest wildfires in the last decade, while 2019 saw the largest known claim in the renewables industry to date – a hail incident at a solar project in Texas in which the cost of the claim was an estimated $70-$80 million. In 2022, at least three projects in Texas were impacted by hail with each suffering eight figure losses. This was on the back of Texas being the number one state for the first time in 2021 for new solar generation capacity coming online. The renewables industry, like the many communities and regions impacted by climate change, is grappling with ensuring project resiliency as extreme weather events become more frequent and severe.
As these perils will continue to pose a risk in the future, there are a number of responses from a risk management perspective that can be taken by the renewable energy and insurance sectors. It may seem obvious, but underwriting each risk individually is of utmost importance. Two projects can be identical in almost every way, but the difference in locations can make all the difference to their risk profiles. How projects are engineered must be dependent on their location with due consideration given to factors such as the elevation of projects in flood zones, the adequacy of turbine model for the local wind regime or the resilience of panels and tracking systems used in hail zones. If projects are not engineered to the best level possible it becomes more difficult to insure them. Projects must be built for the entire duration of their lifecycle factoring in possible increases in the severity of weather.
How are inflation, economic volatility and supply chain challenges impacting the sector?
The 2010s were marked by significant reductions in cost per MW for wind and especially for solar. For example, the National Renewable Energy Laboratory estimated the average price per MW for a utility scale, axis tracking system in 2020 is less than a fifth of what it cost in 2010. This represents incredible cost savings realized in the span of just a decade. However, over the past two years there has been real upwards pressure on pricing for wind, solar and BESS projects. The reasons vary by energy type, but a confluence of factors is driving this including demand, supply chain disruption, government tariffs and inflationary pressures on raw materials.
After such an extended duration of continual price decreases, it is critical that insureds take the time to reevaluate the replacement cost of their projects in advance of their insurance renewals. Coverage is structured in such a way that claims will be limited to declared values plus an escalation buffer; some insureds are now finding that replacement equipment – especially when purchased as a single replacement item versus a bulk order at the outset of construction – is more expensive than the declared value and, in turn, the loss may not be covered in full.
How is the US regulatory environment impacting the renewable energy space and what does it mean for insurers?
Federally, there have been a number of starts and stops due to lack of agreement within Congress on production and tax credits for the renewable energy sector. In several cases the credits have almost expired and then been renewed, which has caused issues for investors looking at the long-term potential. Because of this, a number of states have set their own targets through the Renewable Portfolio Standards (RPS) laying out their commitments to a renewable energy in their state. The passing of the Inflation Reduction Act (IRA) in 2022 is important because it gives investors a long-term view federally. While it’s currently too early to tell exactly what the effect will be, the expectation is clearly very positive. Insurers are unlikely to feel an immediate impact as decisions made around building new projects tends to be made well in advance, but given how robust the incentives are, and the fact that they offer confidence in long-term planning, the IRA is likely to encourage a period of continued and sustained growth for the industry.
What do you see as potential challenges to the market?
We have touched on the issues surrounding severe weather events; additional areas of concern facing this market include the expertise of contractors that are building new projects and the way that insurance policies are structured. Our own claims data suggests that during the last five years, Construction All Risks (CAR) policies have been 50% more likely than Operations All Risks (OAR) policies to suffer a claim. In addition, the average CAR claim is nearly double the average of the OAR claim. In particular, problems involving contractor error can arise when deadlines are tight or they are working with a new form of renewable energy technology. This issue is further compounded as many contractors are named as insureds or additional insureds on the owner or developer’s policy, which means that contractors can be shielded from the consequences of errors. Insurers bear the costs of the claims and insureds face increased premiums and/or more restrictive coverage terms.
With the expected growth in development of renewable energy projects, there is likely to be an increase in new capacity entering the market. Overall, this is to be welcomed, however it is important that those insurers entering the market have specialist underwriting experience and a clear understanding of the technology. The last decade saw a number of insurance companies dipping their toes into renewable energy only to exit the market due to large losses. While this has led to a needed market correction, pricing projects correctly is essential to manage these complex risks and will provide insureds with the stability and sustainability they require. There will always be a push and pull in a competitive marketplace, but few would argue that drastic pendulum swings are to anyone’s long-term benefit.