Parametric insurance, a wind of change in covering renewable energy facilities

1. The promising potential of wind energy in Southeast Asia

While investment in renewable energy has soared globally, reaching $1,740 billion in 2023, Southeast Asia holds significant importance in the energy transition, with wind power seen specifically as a highly demanded resource. The IEA predicts a booming production of 620 TWh of wind energy by 2050, against a baseline of 7 TWh in 2020. Offshore wind power is a particularly attractive resource for Asia, which is expected to account for 60% of all offshore wind capacity installed worldwide by 2050.

Learn more about the development of renewable energy in southeast Asia: Renewable energy outlook for ASEAN 2022

2. Key exposures facing the weather-dependent renewables industry 

While harnessing wind power holds great promise for the extraction of cleaner energy, investors in wind power often face two key challenges:

• Intensifying Natural Catastrophes such as cyclone and tsunami events, damaging equipment directly or causing supply chain interruptions
• Irregularities of wind yield and subsequent revenue volatility, due to unpredictable wind fluctuations of up to 20% from one hour to the next

3. Parametric insurance as a key ally for wind farms  against resource-driven financial risks

To face these potential dangers, many investors issue insurance lending requirements before financing renewable projects. However, natural hazard coverage for the renewable energy sector has proven to be a challenge for traditional insurance,  This challenge is particularly acute due to a lack of historical claims data, as is often the case for renewables or other previously considered uninsurable perils.

In this context, Descartes’ parametric insurance offers a solution of choice, providing tailor-made coverage, a data-driven approach and fast, transparent claims payment. The cover relies on the sum of modeled energy over one year, which if below a certain threshold, triggers a payout.

Interested in learning more?

Check out our case study to discover how Descartes’ parametric renewable energy insurance offers transparent and bespoke cover for clients.