In the race to combat climate change, the energy transition has become an essential pillar. However, as we transition to greener energy solutions, there’s a critical piece of the puzzle that often gets overlooked—insurance. Innovative insurance solutions are key to reducing risks, encouraging investment, and driving decarbonization at the pace needed to meet global targets.
The Role of (Re)Insurance in Commercializing Energy Transition Technology: Opportunities in New York State (“the Report”), written by Cara Eckholm and Brandon Luebbehusen, offers a comprehensive look into the role of the re/insurance industry in the energy transition, showcasing the untapped potential for creating new insurance products that mitigate emerging risks. The Report also demonstrates why companies like Energetic Capital, which focuses on addressing credit risks and unlocking capital for clean energy projects, are vital to the energy transition.
Overview of the Report
The Report paints a detailed picture of the ecosystem of actors in the insurance industry and their pivotal role in the commercialization of energy transition technologies. It highlights both direct and indirect innovations in the insurance space, such as novel underwriting methodologies and the use of AI-driven analytics, that could revolutionize risk assessment for new energy technologies like green hydrogen and geothermal projects.
One of the most significant takeaways is the Report’s focus on how creative, forward-thinking insurance products can accelerate the deployment of clean energy infrastructure. The Report not only explores the potential for innovation but also emphasizes the role of Managing General Agents (MGAs), like Energetic Capital, kWh Analytics, and New Energy Risk, in filling the insurance gap for emerging clean energy markets. As one of the most comprehensive studies in its field, it underscores the urgent need for tailored insurance solutions to drive decarbonization at scale.
Challenges Facing the Existing Insurance Industry
The energy transition brings a new set of risks that traditional insurers often overlook, partly due to their esoteric nature and smaller scale. For example, emerging markets like green hydrogen and long-duration energy storage are seen as too risky because of a lack of historical data. This makes insurers hesitant to underwrite these projects, even though they present enormous growth potential.
Furthermore, the legacy insurance industry is dealing with significant losses in sectors such as life/health, property & casualty, and natural catastrophes, reducing their appetite for innovative, high-potential projects in the clean energy space. In many cases these losses stem from climate change and related outcomes. This has put some insurers in a “defense” first posture, creating bottlenecks in the energy transition, limiting the speed at which decarbonization infrastructure can be deployed.
A notable area for intervention is tax credit insurance, which is becoming increasingly important as developers of renewable energy projects seek to leverage government incentives. The market for tax credit insurance is growing, and yet traditional insurers have not prioritized its development, leaving room for new players to step in and capture this opportunity.
This gap is why Energetic Capital is working with other forward-thinking insurance partners to establish GreenieRE, a non-profit reinsurance company that will be capitalized by the Greenhouse Gas Reduction Fund. GreenieRE’s mission is to remove bottleneck risks that are slowing down decarbonization projects, especially in low-income and disadvantaged communities, and its focus will be on providing creative insurance solutions that enable the rapid deployment of renewable infrastructure. GreenieRE hopes to partner with existing climate-focused MGAs, as well as new companies that emerge as new risks are identified.
The Role of Energetic Capital in Filling the Gap
Energetic Capital’s mission is centered on unlocking funding for clean energy projects through innovative insurance and financing products. By applying a novel, data-driven underwriting approach, Energetic Capital breaks through binary perceptions of credit risk, allowing more projects to become bankable. In an exemplary transaction, Scale Microgrids successfully raised a $225M financing facility with KeyBanc Capital Markets and City National utilizing the EneRate Credit Cover. Julian Torres, CIO at Scale Microgrids stated, “EneRate Credit Cover is a powerful tool I can bring to bear as a financier and developer of resilient and sustainable distributed generation projects. It allows me to target with confidence the large segments of the US market that have historically been considered 'unbankable' by tax equity investors or lenders.”
The Report echoes this need for creativity in underwriting, validating Energetic Capital’s approach. Traditional insurers are often hesitant to cover emerging markets due to the lack of historical data, but Energetic Capital leverages technology and data analytics to underwrite these risks with greater accuracy. The Report’s findings highlight how Energetic Capital’s model aligns with the broader insurance innovations needed for the energy transition, and it specifically mentions Energetic Capital as a leader in this space—further solidifying the company’s role in driving forward decarbonization infrastructure.
At Energetic Capital, our unique combination of specialized expertise and cutting-edge underwriting models allows us to address the risks that other insurers often overlook. By focusing on clean energy projects, we provide the precise knowledge needed to navigate the complexities of these emerging markets. The Report highlights the importance of collaboration between traditional insurers and MGAs like us, as our deep understanding of these sectors fills the critical gaps left by the lack of historical data. Our approach not only mitigates risk but also plays a vital role in enabling the financing necessary for clean energy projects to thrive.
As the Report demonstrates, innovative insurance models are not just a small piece of the puzzle—they are fundamental to accelerating the energy transition. Energetic Capital is at the forefront of this movement, bridging the gap between emerging clean energy technologies and the financing needed to bring them to scale. By partnering with Energetic Capital, stakeholders can help overcome the barriers to decarbonization and pave the way for a greener, more sustainable future.
It’s time for the insurance industry to embrace the change, work with specialized partners, and play its part in driving the energy transition forward.
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