Broker report flags emerging opportunity for London market firms – but competition could be fierce

By Jon Guy

London market insurers are pushing to establish a leadership position when it comes to covering sustainable energy risks, with broker Howden Group highlighting that this sector has been the biggest growth area in the past year.

The impact of Russia’s invasion of Ukraine, which began back in February 2022, continues to resonate across multiple industries. As a result, there has been a huge increase in investment into sustainable energy solutions in an effort to reduce reliance on external oil and gas supplies across Europe.

Jon Guy

Jon Guy

It is therefore no real surprise that Howden Group’s London market appetite survey for 2023 – published on 30 March 2023 – found that political violence and terrorism and war classes also saw a significant uptick in business over the last 12 months.

The broker added that because energy transition and climate resilience were at the top of the industry’s agenda, its survey respondents displayed a bullish appetite for this class of business - the majority of insurers are planning for double digit growth in this sector, mainly driven by new business rather than rate, and two additional carriers are considering entering this market.

Following on from Howden Group’s 2022 report, which revealed that the industry was keen to embrace new markets such as sustainable energy, this year’s findings confirm that 80% of insurers plan to grow in the sustainable energy arena.

Overall, respondents are targeting an average gross written premium growth (GWP) of 13% in this sector.

This year, 35 insurers told Howden Group they were planning for GWP growth of between 15% and 25% in the sustainable energy market, with two further carriers considering entry into this class.

According to a July 2021 article by Johns Hopkins University, sustainable energy can be described as ”resources that can maintain current operations without jeopardising the energy needs or climate of future generations”.

It continued: ”The most popular sources of sustainable energy - including wind, solar and hydropower - are also renewable.”

Capitalising on new risks

Howden Group added that while appetite for sustainable energy risks is strong, the expected risk adjusted rate change is subdued, suggesting that planned growth will be driven primarily by new business.

Therefore, competition for 2023 is set to be fierce, which may put further downward pressure on rates.

Howden Group’s findings come at a time when the UK government has launched a strategy to transform its energy supply via a shift to renewable and sustainable energy, which will see almost £300bn invested into this marketplace over the next decade.

A third of this investment is set to come from private enterprise, which provides a huge opportunity for brokers across the UK.

The Powering up Britain – Energy security plan was published on 30 March 2023 by energy security secretary Grant Shapps.

From wind farms to solar farms and carbon capture facilities, the London market is bracing itself for a sustainable energy bonanza.

While many of the sustainable energy projects that have so far been suggested will be deemed major risks, they will still create a huge boost for regional companies, which will be tasked with supplying materials, manpower and expertise - all of which will require insurance coverage.

Many in the London market are keen to grow their books. Sustainable energy risks may well create real opportunities for brokers that are quick to engage.