Index-based insurance a boon for renewable energy production

Renewable energy production is increasing around the world. Although a promising development, the energy resources involved are inherently volatile. This fact consequently exposes energy producers and other stakeholders to a growing financial risk along the value chain, particularly in the wake of climate change.

The main renewable energy sources of wind, solar and hydropower depend crucially on the vagaries of the weather. Any shortage of renewable resources can critically impact power output. As the renewable energy sector continues to grow, so will demand for insurance solutions to manage associated risks. Swiss Re's Global Head of Engineering, Gregory Schiffer, says: "According to recently published figures by the end of this decade, the substantial increase in renewable energy investment is likely to double insurance spending in six of the world's leading renewable energy markets alone."

Swiss Re has responded to this challenge by designing a suite of index-triggered insurance products to protect renewable energy stakeholders against resulting earnings volatility and, in turn, to help drive investment in the sustainable energy sector. Adds Schiffer: "Compared to traditional indemnity-based insurance, the index-triggered solutions offer faster pay outs, low transaction costs and increased transparency in the settlement process."

Fluctuating winds

Even though wind power is a mature technology with a successful track-record, income for wind farm operators is still at the mercy of fluctuating air currents. This risk affects not only renewable energy producers, but also a growing number of stakeholders. A valuable safeguard against this risk is Swiss Re's Wind Resource Volatility solution.
Download publication Protection against Wind Resource Volatility

Lack of sunshine

Insufficient solar irradiation can put solar farm operators under immense pressure. In years with relatively little sunshine, solar farm operators may sustain large losses as they struggle to cover operating costs and meet revenue targets. Swiss Re’s Lack of Solar Irradiation insurance offers customised protection against such risks.
Download publication Protection against lack of solar irradiation

Falling water levels

Swiss Re’s Lack of Water solution offers hydropower plant operators protection against insufficient water levels during periods of dry weather. This product bears all the hallmarks of the wind and solar protection solutions. It also compensates for the additional costs incurred in the operation of thermal power should the water supply fail.
Download publication Protection against lack of water

Read why Swiss Re's lack of solar irradiation cover increases the investment grade on solar projects

Financing renewable energy infrastructure – see Swiss Re's video on clean energy:


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