Taking cover
Mike Farish interviews the chief executive of Ascot Renewco about the need for dedicated insurance services in the renewables sector
Renewable energy installations are not immune to any of the hazards that can threaten more conventional industrial plant. They can be subject to hold-ups in the shipment of equipment and parts, delays in project completion, breakdowns in machinery, operational damage, interruption to business processes and the consequences of political change or even of acts of terrorism or war. Therefore they need to be insured. But is there a need for dedicated insurance services for the renewable energy sector?
Someone who thinks there definitely is such a need is Alex Lumby, chief executive of Ascot Renewco - a division of insurers Ascot Underwriting, set up specifically to service the needs of renewable energy companies. Lumby, who returned to the UK in February this year from Ascot’s operations in the Far East to take up his present position, is emphatic about the existence of a real market requirement. “The renewable energy sector is one of the fastest growing industries in the world,” he argues. “Whilst the technology associated with onshore wind is now relatively mature, the other classes of renewable energy, such as offshore wind, solar, wave, tidal and biofuels utilise proto-typical technology, which requires a detailed and informed understanding to enable a risk to be underwritten.”
Lumby concurs with the point that there are similarities between the hardware and procedures involved in the renewables sector and fossil fuel industries. But they are similarities that can disguise subtle, but nevertheless important differences with significant implications. “Whilst there are clearly some areas of overlap with the traditional oil and gas sectors, for example with some offshore technology, equally significant variances also exist,” he comments. “For example, a typical offshore oil and gas monopile is approximately 2.8m in diameter, whereas new offshore wind projects are looking to utilise monopiles of 5.1m in diameter.”
But whatever the details, Lumby believes that there is a distinct market with its own particular requirements and that, in turn, there is a need for a new type of insurance operation to serve those needs. He does not claim that Ascot Renewco is the only organisation to have noticed this fact, but he does argue that it is the only one so far to have responded to it in a comprehensive fashion. “A number of insurers have looked to participate in selected areas of the renewable sector, either by way of class of insurance or technology,” he states. “But we are the first dedicated Lloyd’s vehicle looking to write a full suite of coverages across the entire renewable spectrum.”
As evidence to support his claim, Lumby highlights some of the specialist expertise that the organisation has brought onboard. “Given that much of the technology involved is as yet unproven, the traditional methodology of underwriting a risk needs to be enhanced for the sector,” he explains. “As such, Ascot has turned to academia and employed the services of Professor Leon Freris, a professor of renewable energy, and also to industry from where we have retained the services Captain Peter Hodgetts, who is CEO of offshore renewable energy consultants SeaRoc.”
Experience
Between them those individuals bring a lot of experience to the organisation. Professor Freris was instrumental in setting up CREST (Centre for Renewable Energy Systems Technology) at Loughborough University, for example, which is now regarded as one of the leading international centres in the field of renewable energy, both for research and education. Meanwhile, Captain Hodgetts’ company was responsible for the engineering coordination for the 500MW Greater Gabbard Offshore wind farm and will continue with the responsibility for all associated marine and construction operations.
For Lumby, the deployment of such specialist expertise is not merely desirable but absolutely essential. “In order to keep up to speed with such a rapidly growing sector, it is imperative to have a dedicated and focused team working within the class,” he states.
Nevertheless, the whole area of specialist insurance services for the renewables sector is still in its early days and is in many ways untested. In the circumstances, any judgements about its utility to the sector or its own viability as a business are necessarily provisional.
But Lumby is upbeat about the prospects for the future. “We have been more than pleased with the responses we have received, both from the broking community and from the industry,” he reports. “Ascot Renewco now has a leading role on risks from offshore and onshore wind to biofuels, solar, wave and geothermal technologies, with a geographic spread from Australia and New Zealand, through Asia, Europe, North and South America. Whilst different sectors of the industry continue to develop at varied rates, we foresee the development of a strong and wide ranging global industry in the future.”
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